Financial adviser Siobhan Ashby realised there was something amiss with two new clients’ superannuation investments not long after they approached Northeast Wealth for help in mid-2022.
The clients had received advice from another firm in 2014 and, while carrying out a routine review of the couple’s super, Ashby, a senior financial adviser with Northeast, found that the male member of the couple had more than 60 per cent of his superannuation balance in cash, and the female member more than 80 per cent.
For a couple who were aged 24 and 25 when they received the initial advice, this asset allocation was clearly inappropriate. Ashby identified that a rollover into a new super fund, on the advice of their previous adviser, had resulted in the couple’s funds not being invested in the appropriate asset mix and that all of their contributions since that rollover had been held in cash.
Ashby first moved to ensure that the couple’s super was immediately invested appropriately, but also set in train a process to seek compensation for the opportunity cost of being out of the market for seven or eight years.
“Firstly, the objective was to fix it for them,” Ashby tells Professional Planner.
“They’d come to us because they want the right advice, and so first things first, we did an assessment of their super fund. We made investment recommendations that were [consistent] with their ages and their risk profiles and we made sure that their super became invested, just to stop it from sitting in cash.”
When Ashby inquired about how this could’ve happened the clients had no idea.
“They were both quite surprised to learn that it had happened and were under the impression that their super should have been invested,” Ashby says.
“I encouraged them to go back to the previous firm, and to raise their concerns with the with the firm and to try and figure out what had happened.”
Seven months of radio silence
The couple contacted their previous adviser’s licensee in November 2022. The licensee immediately acknowledged the contact and would conduct a full advice review but that it wouldn’t have an answer until mid-2023, a period of seven months.
“That suggests to me – I have no proof of this – that they had either very poor management, or they had a lot of these that they were reviewing at the same time,” Ashby says.
“I don’t see how it takes seven months to reach a conclusion.”
The clients followed up with the licensee twice more and received no response, but on a third attempt the licensee replied and revealed the adviser the couple previously dealt with had been terminated as an authorised representative. Even so, the licensee had continued to charge the couple advice fees – Ashby describes them as being “at irregular intervals, for irregular amounts” – even though it had provided them with no services since 2016.
It wasn’t until July 2023 the licensee came back to Ashby’s clients and offered compensation of $16,000. More than half of this amount, around $8400, was a refund of unauthorised advice fees, implying that the licensee believed the investment opportunity cost to the couple for the six or seven years their super was mis-invested was less than $8000 between them.
“They only accepted liability until June 2016, because they said that we assess that [the clients’] relationship with this adviser had ceased by that point, so that’s when we want to accept liability until,” Ashby says.
“We just looked at that and said absolutely not. We accept that you had ceased the relationship by that point, but to act in their best interests, you should have ensured that the superannuation was going to get invested in the first place, but then also had a measure in place to ensure that future contributions continued to get invested.”
Ashby says because the relationship ended doesn’t remove the liability the adviser has to the client, in this case to make sure their investments were set up properly in the fund.
“I would expect that that’s a reasonable level of responsibility for an adviser to have and that’s the grounds that we argued back on,” Ashby says.
Support of the licensee
Ashby says Jack Standing, head of advice at WT Financial Group (the owner of Northeast’s Licensee, Synchron), provided support and guidance on how to approach the claim.
“He knows consumer law back to front,” Ashby says. “He’s just such a good person to have that discussion with, and he was very quickly able to tell me how [the previous licensee] should be measuring it and therefore, what sort of an outcome we could expect. It was very helpful from our end to have that feedback.”
Northeast calculated what the couple’s superannuation balances would have been when they came to Northeast if the previous adviser had left them in their existing fund, which Ashby and Northeast founder and principal James O’Reilly assumed to have been invested appropriately, and had the previous adviser not mishandled the rollover.
The difference between that figure and the actual balance of the couple’s accounts when they came to Northeast formed the basis of the compensation claim.
“The [previous licensee] was comfortable with what we put forward,” Ashby says, and it accepted Northeast’s revised figure in December last year.
“The result was… that rather than getting about $8000 apiece, she received $33,500 and he received $9500.”
O’Reilly posted to LinkedIn in early January about Ashby’s work and noted that the money recovered for the clients could, on conservative estimates, be worth about three-quarters of a million dollars by the time they retire.
Never any hesitation
Ashby joined Northeast as a financial adviser in August 2020, and was promoted to senior adviser in March last year. Her career in advice started as a client service officer with a now-defunct advice firm, before she moved to another firm in a paraplanning role.
After finishing university and commencing full-time employment she became a paraplanner with a super fund, and then moved into an associate adviser role with a major bank, no longer in the advice industry.
Ashby says there was never any hesitation about seeking compensation for the clients when they presented with their superannuation issue.
“This is why we do what we do,” she says.
“There’s, of course, tangible advice elements for an adviser, which is what members come to you for: they’re looking for wealth creation.”
She adds that something often overlooked is the intangible element to advice, which is simply acting in the best interest of the client.
“It wasn’t about the time that was invested or what was in it for us which, incidentally, is nothing, except for a happy relationship, of course,” Ashby says.
“We have an obligation to look out for them, and to spot the opportunities that they’re not spotting. That’s why they come to us.”
It’s a quirk of talking to both Ashby and O’Reilly that they consistently refer to the firm’s clients as “members”.
“That’s because we’re dealing with something very important, which is a person’s finances, which is ultimately their life,” Ashby says.
“We want people to have a feeling of community and care, and we want people to feel engaged with us, as we are with them. We have a very high touch point, in terms of our ongoing service, and so we want people to feel that they’re a part of something.
“We’re very proud to be a pure sustainable investment business, so there are things that we do that set us apart and we want our members to feel excited to be a part of that and to get that sense of community.”
