Deal only with licensed financial advisory businesses

A true story from the Northern Territory

In 1999, John and Lynette Longstaff went to an investment seminar held in Darwin by a financial planning company. At the time, they had almost paid off their own home, and were thinking about the future for their three children. John is a truck driver and Lynette works in factory.

FIDO says
John and Lynette's story shows how dealing only with licensed financial advisers can help you, especially if their advice turns out to be unreasonable or inappropriate.

The company recommended that they buy two Brisbane apartments for $190,000 each. To finance the deal, they borrowed more than $400,000 on their home.

After buying the apartments, they found out that the properties were really worth much less than they had paid. On top of that, they soon realised that the interest payments and other expenses of their investments were sending them broke. John and Lynette were forced to sell out at a $75,000 loss, which they now owed to their bank, not to mention the extra worry the family had to face.

FIDO says
Fortunately, the financial planning company that they used was licensed by ASIC which meant that they belonged to the Financial Industry Complaints Service (FICS). (All ASIC licensed financial advisory businesses must belong to an independent complaints scheme approved by us.)

When John and Lynette came to us, we put them in touch with FICS, which is a free service for consumers. FICS heard their case, and found they had been given seriously inappropriate and unsound financial advice and had suffered a substantial loss as a result. The financial planning company had to pay them $91,000 in compensation.

FIDO says
John and Lynette were luckier than many people. Real estate investments lie outside ASIC regulation. It was only because they had dealt through a licensed financial planning business that they could get compensation without a lengthy and uncertain battle in the courts. Other people have got badly burned investing in property marketed by some real estate agents and property seminar promoters.

FIDO's tips

Read what you can expect from a licensed financial advisory business

FIDO Website: Printed 09/10/2010