If you are looking for a financial advisor in Perth, you have probably noticed that there are a lot of choices out there. Financial advisors are bound by a concept called “duty of care.” The concept of having a “duty of care” is communicated in many different ways by statutes involving the provision of financial advice.
What is “Duty of Care”?
“Duty of care” basically means that your financial advisor is required to look out for your best interests and inform you of developments that may increase the risk of any investment they have recommended to you.*
Swan and Baker Pty Limited vs. Marando
It is best illustrated by a decision which was upheld by the NSW court of appeal last year: Swan and Baker Pty Limited vs. Marando. A financial advisor and the firm he worked for were accused of misleading and deceptive conduct by two investors. They were also accused of a breach of professional duty because they had provided negligent advice.*
In 2008, Mr and Mrs Marando invested $500,000 in the City Pacific Ltd Mortgage Fund on the advice of accounting firm Swan & Baker. The funds were to be invested for 90 days and available for reinvestment after the term had elapsed. Swan & Baker gave the Marandos a copy of a document called the Fund Product Disclosure Statement. Within the statement was a 14-day “cooling off” period that applied to new investments.*
During the cooling off period, the local media published articles questioning the financial security of the company. Immediately, investors wanted their money back. City Pacific Ltd barred investors from withdrawing their funds, but the cooling off period was still in effect. Because Swan & Baker had failed to notify the Marandos of the cooling off period, they didn’t request to withdraw their capital in time and were prevented from doing so.*
The Marandos were awarded $377,390 in damages.*
Contact Approved Financial Planners
At Approved Financial Planners, we take our duty of care seriously. Cases like Swan & Baker vs Marando simply don’t happen with us. To learn more, call 08 6462 0888.
*Sparke Helmore Lawyers, 24 March 2014: “Beyond advice–the financial advisor’s extended duty of care.”
