Sometimes what you say to a client in an attempt to ‘summarise’ or ‘short-hand’ information relating to an investment product can come back to haunt you.

In Lee v Westpac Banking Corporation [2012] NSWSC 899, the court found that certain statements made by a Westpac financial planner to a long term client in relation to an investment product were misleading and deceptive under section 12DA of the ASIC Act. The Court awarded damages of almost $400,000 plus legal costs to the client.

The sting in this tale is that the client had been a long term client of the financial planner AND the client had also told ‘untruths’ in its application for the product, neither of which absolved the financial planner of its responsibilities and obligations.

The key lesson for financial planners and the businesses that are ultimately responsible for their conduct is to make sure that the client understands the product. The only way they can do is if you fully and accurately disclose the details of the product: never summarise or short-hand your advice in relation to the product and always keep notes.

What can you do?

There are lessons here for all businesses and there are things that you can do to help protect your position and your business:

  • Always keep accurate notes of each discussion and communication you have with your clients, even if they’ve been long term clients;
  • Never summarise or short-hand the features of your product or service, particularly where that short-hand summary omits the key features or downsides of the produc or servicet;
  • Never omit the key features of a product or service in your written and/or oral presentations
  • Try and avoid comparisons of products or services  such as: “just like XYZ” unless the two are identical in both the pros and cons. If they are not, then avoid the temptationto say they are!
  • If you’re unsure as what you can say or can’t say, ask Thynne & Macartney!

Thynne & Macartney’s Business Advisory team can help you with your financial planning businesses from compliance to product and licensing advice to your day to day contractual and legal obligations.

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

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