Lawyers lash bad advice and urge urgency on compensation scheme

17 April 2020

Lawyers group, the Australian Lawyers Alliance (ALA) has called on the Government to urgently implement a compensation scheme of last resort arguing that inappropriate financial advice can often go unnoticed until an economic crash occurs. 

“Consumers who have received negligent financial advice need a Compensation Scheme of Last Resort now more than ever as financial losses are amplified by the COVID-19 economic crisis,” ALA spokesman, Josh Mennen said. 

“The Government must move to implement this Scheme as soon as possible because the proposed scheme is forward-looking, every day that it is delayed is another day of financial losses that wronged consumers may never be able to recover. 

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“The Government committed to introducing legislation to enable this Scheme by the end of this year after a number of horror stories were graphically exposed through Commissioner Hayne’s public hearings,” he said.  

“We understand the government’s attention is justifiably diverted towards immediate COVID-19 management measures but this long-promised safety net cannot be delayed any longer as many consumers are now suffering devastating, often permanent losses, through no fault of their own.” 

“A Compensation Scheme of Last Resort will enable consumers to recover losses they have suffered due to the misconduct of a licensed financial adviser who has become insolvent or is otherwise unable to pay compensation. The need for such a Scheme was endorsed by Recommendation 7.1 of the Financial Services Royal Commission report.” 

“The Australian Financial Complaints Authority has established systems to assist consumers who, it has previously determined, are entitled to receive compensation from an adviser who is not able to pay,” Mennen said.  

“However, these initiatives do not assist the large cohort of consumers who will now be suffering devastating COVID-19 losses caused by negligent financial advice where the adviser is now insolvent or deregistered.” 

“Financial advisers have long been incentivised through grandfathered commission structures and asset-based fees to invest their client’s funds into higher risk portfolios than is appropriate for their risk tolerance,” he said.  

“This inappropriate financial advice often goes unnoticed until an economic crash and hundreds of individuals and families will now be reeling from the impact of losses incurred as a result of the current economic crisis.”  

 




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The tone of this article implies that Financial Advisers are some how responsible for the fall in value of clients investments during the current market downturn with COVID-19.
This predatory group of lawyers obviously don't understand the relationship between Financial Planners and their clients during a time when the Planners are providing ongoing support and advice during these unprecedented times.
How dare they raises such in appropriate and unfounded issues during this very difficult time.
Once again the sharks in suits are at it again.
This has to stop as it is not in a clients best interests.

what about a new article with the title "Financial Planners want 1,500 lashings for all lawyers" for being juvenile scumbags only acting in their personal interest and at the expense of their client(s), the public and everyone else and making life a living hell for everyone.

I wondered how long it would be until the "ethical" ambulance chasing lawyers appeared again, warping market losses into inappropriate advice! Given many of these lawyer are paid as a percentage of any compensation awarded, it is a little ironic that Mr Mennan calls out advisers for being incentivised!

What about a compensation scheme for bad legal advice, such as the lawyers who told great Southern investors not to pay their loans, only to see them double due to penalty interest over several years. After negotiating a settlement which covered only their legal fees, they walked away and would even help individuals to negotiate payment arrangements with Bendigo Bank. Lawyers have zero interest in consumers. All they want is a honey pot they can raid to feather their own nests. If a compensation scheme is ever created, it must be protected from thieving lawyers

These guys have obviously run out of work in other areas and are trying to drum more schemes that are in their best interests, not their clients. This class action industry should be banned.
Legal advice lacks transparency and fees do not represent value to clients. However, try getting anything done about that? Misappropriation of trust funds by solicitors, a regular event, isn't worthy of being struck off the register. After 2 occurrences they are merely required to work for someone else.
In difficult times always expect these carpet baggers to appear.

Lawyers are truly repugnant creatures driven purely by self interest. They are only interested in getting the scheme up and running so they can get paid their 30 to 40 percent of any settlements. The hypocrisy of lecturing financial planners in respect to commissions and asset based fees is astounding.

What a disgrace these people are.
Corrupt bottom feeding dwellers that prey on current instability and volatility with then goal being financial gain.
And these people are accusing advisers of poor financial advice based on a massive world wide decline in financial markets, not brought about about by financial institutional vulnerability as with the GFC, but an unpredictable human health crisis on an unprecedented scale.
These comments from Josh Mennen clearly define the vultures that Lawyers have become.
They hold themselves out to be the justice league, when they are nothing more than untrustworthy salespeople flogging a product for financial gain.
They do not act in the clients best interest....they act in their own best interest.
It is sickening how these people appear to have no conscience and will look for any opportunity to blame advisers for outcomes completely beyond their control.
Disgraceful.

Shows just as clearly as ever that lawyers have no idea how the financial services sector operates. Gives people who are suffering financially some kind of last straw hope of redress, when in fact there is none. I've had clients who over the years have tried to push me into using higher risk investments because they are only focussed on big returns they think they are missing in good times. I gave in to client demands just once, just before the GFC, then lost the client because the risks of the investment were more than they were actually willing to suffer. And they were reasonably financially literate. And I had worked hard to educate them about the risks. I'm not saying the "large cohort of consumers" now "suffering devastating COVID-19 losses" were themselves at fault for chasing high returns in good times, nor that "negligent financial advice where the adviser is now insolvent or deregistered” has not occurred. However I would ask whether Mennen is aware that until 30 June this year, AFCA is receiving complaints dating back to 1 January 2008 (just pre GFC), and will be pursuing insolvent and deregistered financial firms involved in providing advice that gave rise to the complaint? And is this information being passed on by legal firms who are hearing the distress signals from consumers? And are these consumers being told that the AFCA service is free to consumers lodging a complaint? Or are the relevant legal firms simply rubbing their hands together in anticipation of nice big fees??? And how on earth can anyone with a smidgen of knowledge about grandfathered commissions, or commissions at all, think that advisers have been incentivised into using higher risk portfolios than appropriate. Back when advisers were being paid commissions by financial institutions, those commissions (paid out of management fees earned by the financial institution, not from the client's portfolio) were fairly consistent across a whole range of financial products, both low and high risk. And advisers have always had a duty of care to clients. This is not a recently added requirement. So, Mr Mennen, kindly get your legal cohorts to get off our backs and let us get on with doing what we have always done well.....looking after our clients interests first. Go chasing the financial institutions who were the irresponsible link in the chain instead. And again I ask Mike Taylor, how can you let such irresponsible "reporting" get through the editorial process??

This is exactly why there should NOT be a compensation scheme of last resort. It will be exploited and abused by the sort of low life scum of the earth lawyers who are lobbying for its rapid introduction. It will force up advice costs for everybody, but consumers will ultimately see little benefit. The extra costs borne by consumers will primarily flow into the pockets of these immoral leeches. No surprise it was originally recommended by a lawyer.

If ambulance chasing lawyers want to make money out of falling investment markets, surely there are more lucrative opportunities staring them in the face?

1. Go after the union funds that deceptively mislabelled their 80-90% growth funds as "Balanced".
2. Go after the union funds who have diluted the asset values of passive members compared to withdrawing/switching members, by not revaluing unlisted assets in line with market movements.

This group of low-life represents the worst of all things legal. Where is the FPA's response?

The lawyers are doing their job. It is not about finding the trurth. Their job is to obtain the best result for their client. FASEA put the same onus on our profession.

If there is an issue it is with AFCA and how they interprete the regulations. I have not yet seen AFCA justify their "client investment risk profiling method" - they just use something to to justify their decision. Since AFCA are not called upon to be transparent and open they have been allowed to do whatever they feel like.

Its ok, he works for Maurice Blackburn Lawyers, like ambulance chasers waiting around the corner with their business card ready to pounce on some unsuspecting victim, no win no fee, but don't lose or we hit you hard with all the fees from the other party, plus our consumables. Oh and if we win, well we will take more than 50% of the proceeds (is this not a commission based model) and we can take up to 75% if we want to!!!
He is just hinkering for business, misguided, unprofessional and derogatory. If he thinks that consumers can blame Advisers because of Covid 19 and market falls, I'd like to be a fly on the wall in that hearing!!

EX-CFP: I agree with your sentiment about predatory conduct. However, the lawyer in question is not stupid and this is not his first case. AFCA (and FOS) jurisdiction excludes market performance as the basis of a claim. That is not the route these people take. The claim is that the planner did not adequately explain to clients the risks in investing in the market, and had they the client would not have adopted or agreed to the portfolio. Regrettably, this type of claim almost always succeeds because there are usually deficiencies in the planner's paper work demonstrating the communication of the market risks to the client. By the way, it is not merely adequate to say the market may go up and also down or some general statement about volatility. The courts are clear that the clients must be told about the probability of a loss and the potential extent of that loss. What is needed is a clear statement that, for example, the Aus. share market has experienced 6 negative return years in the past 25, that the worst loss during that period on a 12 month basis was -40% and a clear statement that client may make actual capital losses if they exit the market during this period as opposed to experience"volatility".

I never said he was stupid, however he is highly conflicted, and what is absolutely true is that he was never present during the interviews with the client. He can just sit there and position his potentially conflicted view, how would he know what is right for a client? As an Adviser we have lengthy discussions with our clients which are documented, and yet these type of people will only make money by taking victims to court and taking 50% of their claims as commissions. Nothing more nothing less, it’s conflicted remuneration, it’s percentage based and it’s hypocritical to target Advisers for their own selfish gain.

Are these the same lawyers that provide unlicenced Financial product advice? Why are we not targeting the lawyers who claim they are Superannuation specialists? They ARE providing financial Product advice and they are NOT licenced to do so. Before anyone comes back and tells me they are not giving advice, have a look at the definition of advice is. I can be deemed to be giving advice at a party with a beer in one hand and a hotdog in the other. How come lawyers can sit down with a client and formulate a plan about their super fund and insurance attached to it and get away with it? Are they going to start giving Covid19 super fund release advice for $300 as well?

81Alpha, the answer is simple - lawyers have an exemption allowing them to do so - Corporations Reg. 7.1.35A(b), (c) and (d).

After everything you guys have been through and you still don't get it. The majority of the responses here are par for the course for the likes of these people.

The Corona virus pandemic was not foreseeable with the corrupt information being provided by China and the World Health Organisation. Why not create a Compensation Fund with the money now being paid to ASIC !

This article is offensive and derogatory towards Financial Advisers who are out their helping clients navigate through these difficult times. To imply that Financial Advisers are to blame for "clients suffering devastating, often permanent losses, through no fault of their own", and financial losses from the impacts of Covid-19 is a disgrace and shows a complete lack of knowledge of what Financial Advisers do for their clients everyday. I ask the question - with all of the TV advertisements, with the advertised offer "no win - no fee" options for their clients, when they do "win" - do they still receive up to 50% of the designated payouts from these cases? Is this not considered a "commission"? Is this a "percentage based" or "asset based fee" of remuneration? Is this not an incentive to "win" at all costs, is this not conflicted? I'm absolutely certain that when I recently helped my client with his "terminal illness claim", I did not receive up to $500,000 for my advice from him at his most vulnerable time in his life, in fact I'm certain that I charged him nothing, because under our "ongoing service agreement", this is the valuable service we as Financial Advisers provide everyday.

So the level of litigious risk associated with the provision of any form of financial advice no matter how thorough
is not worth it on any level whatsoever ? It is simply stupidly risky to be providing financial advice ?
This clearly appears to be the case.
I would appreciate if Anon1 would respond to this comment as they appear to have an in depth understanding of the subject matter.

So, whom do the Financial Advisers sue because their asset based fee revenues have now reduced? Asking for a friend.

“Financial advisers have long been incentivised through grandfathered commission structures and asset-based fees to invest their client’s funds into higher risk portfolios than is appropriate for their risk tolerance,” he said.

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