By: Ben Whitwell

Slater & Gordon is investigating compensation claims on behalf of investors who received financial advice from Commonwealth Financial Planning and Financial Wisdom, subsidiaries of the Commonwealth Bank of Australia. Slater & Gordon has extensive experience in acting for people who have suffered loss as a result of poor financial advice. Below is a recent example of a professional negligence case run by Slater & Gordon.

Double Geared Investment Advice

At the time of receiving the advice that caused their losses, the couple owned their own home outright. Their financial goals included ensuring they had an adequate income stream in their retirement and purchasing a new vehicle.

The advisor recommended that the couple take a loan against their home and use that money to purchase shares in managed funds. He then advised that a margin loan be taken against the shares to purchase more shares. This is sometimes referred to as 'double gearing' and put the couple's home at significant risk. Double gearing is typically only appropriate for high-income earners who have a high tolerance for risk, and who have many years of their working life remaining.

Despite the couple raising concerns their about the risks associated with the investment strategy in the early stages of 2008, their advisor underplayed the risks and recommended that they retain their investments as they were. In mid-2008, as a consequence of the Global Financial Crisis, the value of the couple's shares dropped dramatically and continuously, requiring them to meet multiple margin calls made by their margin lender. Eventually the couple opted to convert their investments into cash, but in doing so suffered significant losses.

The couple lodged a complaint with the Financial Ombudsman's Service (FOS). FOS found in favour of the financial advisor. The couple then sought advice from Slater & Gordon about the strength of their claims and the appropriateness of the advice received. On Slater & Gordon's analysis the couple had a strong claim against the advisor in negligence. Slater & Gordon's views were endorsed by a financial services expert whose opinion was that the financial advisor had recommended a high risk strategy where a conservative strategy was appropriate to the clients. Slater & Gordon was able to negotiate an out-of-court settlement with the advisor and their insurer that recouped the substantial part of for the couple's losses.

People wishing to obtain independent advice regarding their claims against Commonwealth Financial Planning and Financial Wisdom or seeking further information about our investigation should contact us as soon as possible.

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