The high cost of advising inaction
Financial services organisations that issue documentation to clients or members saying things such as ‘at this time there is no action required by you’ are treading dangerous ground following a recent decision by the Superannuation Complaints Tribunal(SCT).
The tribunal recently dealt with a case where a member of a superannuation fund sought compensation from the fund because he had been placed in a cash investment option for 13 weeks rather than a more aggressive investment setting.
The bottom line of the complaint was that the member had been rolled out of a defined benefit arrangement and into a personal division of the fund and while he had been informed of the fact had also been told in a letter that “at this time there is no action required by you”.
Notwithstanding the fact that the same letter urged the member to read further information contained in the documentation, the SCT found that the correspondence “was liable to create a misleading impression in the mind of the recipient”.
The tribunal said it was satisfied that the words used in the context of the emphasis attributed to the sentence could easily have encouraged the recipient to take no action.
It said that given the difference between the returns from a cash option and other options available through the fund, the trustee should not have created the impression that inaction was an appropriate course of action.
AUTHOR
Mike Taylor
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