Good Returns reported on the case in early September. The adviser in question had sold products to a New Zealand man in 1993, who then moved to Perth.

In 2011, almost 20 years after the sale, his wife emailed the insurer, wanting to review the plan. She said it listed the financial adviser, but that neither she nor her husband had any contact from him since being in Australia.

IFSO backed the client and said the adviser had not done enough.

Advisers questioned how that meant they should deal with their clients.

“I have always worked under the understanding that if my client moves to Australia then I cannot offer them ongoing advice,” one said.

“If they come back to New Zealand even for a day I can meet and provide advice while they are here. So you would think if this is the case the adviser had at least some mitigating circumstances for not offering advice previously. Or have I misunderstood the Australian regulatory requirements?”

Adviser Murray Weatherston said the case manager was optimistic in the claim that it was standard practice for advisers to have a system of regular checks with anyone for whom they had ever arranged a product, unless the client opted out.

"This finding must be subject to some debate – I am sure the pointy-heads do that, (or say they do) but I frankly would be surprised if that was standard practice across the board for insurance advisers in general."

In clarifying, IFSO said the original product in this case (a superannuation plan with life insurance) was sold to the clients more than 20 years ago, but the case was about the ongoing obligations, and the adviser’s response when his clients asked for assistance after 2013.

“The clients didn’t understand how their product worked and they became concerned about changes the product provider was making to it.  They asked the adviser for a review and, later, for assistance to understand the changes being made, which they did not receive," said deputy ombudsman Louise Peters.

While the adviser said he had retired and was not taking new clients, he confirmed he was receiving a servicing commission as the servicing adviser. “A servicing commission, in respect of a client, is a payment for a service to that client, usually with ongoing obligations.”

Peters said the financial services environment has changed significantly, since the Financial Advisers Act was implemented, and financial advisers who had been in the industry for a long time needed to reassess their practices.

The IFSO Scheme found that the adviser had not met his legal obligations, in respect of the clients’ requests for a review and for assistance to understand the impact to them of the changes the product provider was making. “The adviser did not have a practice of providing regular reviews, he didn't have a servicing arrangement in place with these clients, and he didn’t respond adequately to their requests for assistance.” 

The client had wanted to arrange for advice to coincide with travel to New Zealand.

Peters said it was a good case to learn from.

“Advisers have a really important role in helping clients understand products. The opportunity for clients to get personalised advice, and to have products explained by someone with technical expertise is the real value advisers add for their clients. I look forward to discussing the case further with interested advisers at our webinar in November.”

IFSO said the attention paid to the case had been a good reminder to include more detail in the case studies it released.

"While we ensure case studies are anonymous, they can be helpful for advisers to understand what went wrong, how the complaint could have been avoided, and the reasoning behind our decision, which was to uphold the complaint in this case.

“We know that advisers have a key role in helping clients understand financial products. This case is a good reminder of this role. As we get so few complaints about advisers, each one is a great opportunity to reflect on how we can all improve our business processes.”

IFSO will run a free webinar on November 7 about the case.

Peters said it highlighted the level of service expected of advisers in light of their obligations under the Financial Advisers Act and the Consumer Guarantees Act.

The revised case study can be found here.