Australianfinancial advisers have been warned they risk exposure to charges of mis-selling and consequent legal action if they underestimate or fail to address the complexities of providing advice on pension transfers from the United Kingdom.
UK-based financial planning company Montfort International, which specialises in providing international pension extraction services, has pointed to UK financial advisers currently facing mis-selling litigation and has warned that Australian advisers risk being similarly embroiled.
In a number of instances the litigation has resulted from British retirees being confronted by large tax bills because of the alleged failure of UK advisers to fully inform clients of all the implications relating to international pension transfers.
“If Australian advisers have been involved and, having done their due diligence, have failed to pick up the mistakes or misinterpretations, then they may also find themselves the subject of litigation,” Montfort’s Geraint Davies says.
“We are aware of a growing number of instances where inappropriate or incorrect advice has been provided by UK advisers and where Australian advisers may have also incurred a liability,” he says.
Davies says the bottom line was that there were very few financial advisers in the UK or Australia who could boast a thorough understanding of international pension extractions.
The scale of the problem has been growing because of the upsurge in British retirees migrating to Australia attracted by a favourable exchange rate and beneficial taxation arrangements.
Commenting on the recent Senate Committee recommendations in Australia suggesting the extension of the transfer period from the existing six months to two years, Davies says this was helpful but will give rise to new issues and complexities.
Those issues include exchange rates and timing, in circumstances where it was possible to adopt advantageous currency positions within the proposed two-year timeframe.
In Australia, Santi Burridge, a senior planner with Australian Financial Services, says that given the volume of UK retiree immigrants entering Australia it was “scary” to contemplate how many might have been provided with inappropriate or mistaken advice.
“The problem is that most ordinary advisers wouldn’t have a clue about the various complexities and the potential ramifications are huge,” he says.
