Ask Paul: A Financial Planner Sold My Dad’s Wallet Without Permission

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Dear Paul,

I write on behalf of my 85 year old father. After 60 years of living in his house, the upkeep and maintenance are too much and he sells it. He is mobile and has decided to travel and stay with his son.

My dad has $10,000 in savings and invested $100,000 through a financial planner in a super account with stocks and managed funds that worked, with a revised plan to trade two stocks in August/ September 2021.

Unfortunately, the financial planner retired and transferred the file to a new planner. Suddenly, in December 2021, his portfolio was completely sold and an annuity purchased, paying him $590 a month, so he would be out of money several years from now.

He didn’t realize anything had changed and didn’t ask for any changes to the structure.

I read the last letter and couldn’t figure out why the new planner changed his portfolio, which kept the dividends, paid a small income, and paid the planner a very small commission – as opposed to dad short of cash. ‘silver !

We called the scheduler and asked about the change, and to set up a meeting, but he couldn’t meet that week, and called later to say he couldn’t handle the account anymore.

Unfortunately, these changes came to light in March 2022, when I looked at the options to put the maximum funds allowed from the sale of the house into his super account and then change it to AustralianSuper. We are also aware of the 4% levy each year.

My father is stressed about losing his full pension.

Is there a fallback position based on faulty planner advice and lack of consultation (which may have been blamed on COVID)? My dad hasn’t had an appointment with the scheduler in years, except for a one-time call or two. -Jen

Jen, the information you gave me about your father’s experience with a financial planner is really bad.

The Royal Commission into the Banking, Superannuation and Financial Services Industry would have been delighted to hear about it.

But your dad’s situation — the first planner retiring and a second planner making the changes, then no longer managing your dad’s portfolio — doesn’t leave you alone. Changing a client’s portfolio from stocks to an annuity, or anything else for that matter, without permission is outrageous.

I suggest you call the financial planning firm and file a complaint. Advisors, retired or not, are required to keep a detailed file on your dad. This file will explain why changes were made.

How changes could be made after a very short phone call is beyond me. If the answer is not satisfactory, you should file a complaint with the Australian Financial Complaints Authority (AFCA). You have strong rights here. I strongly suggest you start with a complaint to financial planners.

Now let’s move on to selling the house. If he sells, he will be valued under the non-sole proprietorship asset test. He can have over $800,000 in assets and still get a pension.

Here we enter into a great complexity in terms of investments, maximizing income while minimizing tax and also trying to maintain a pension.

One key fact is the price the home will sell for, but there are many more. You and your dad really need to sit down for several hours with a paid advisor and get all the facts on the table: how much income your dad needs, his views on estate planning, drafting a will, maximizing his pension and soon.

I appreciate that your father had a bad experience, but since the royal commission the focus on quality advice, training and standards has improved greatly. Talk to friends, your accountant or your dad’s super fund and find a paid professional advisor.

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