Ask Paul: A financial planner sold off my dad's portfolio without permission

Dear Paul,

I'm writing on behalf of my 85-year-old father. After 60 years of living in his home, the upkeep and maintenance are too much and he's selling it. He's mobile and has decided to travel and stay with his son.

My father has $10,000 in savings, and had $100,000 invested through a financial planner in a super account with shares and managed funds that ticked away, with a revised plan to swap out two shares 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 off and an annuity purchased, paying him $590 a month, so he would run out of money in several years. 

He didn't realise anything had changed, and had not requested any change to the structure. 

I read the latest letter and could not comprehend why the new planner changed his portfolio, which maintained dividends, paid a small income and paid the planner a very small fee - as opposed to Dad running out of money!

We called the planner and questioned the change, and to set up a meeting, but he couldn't meet that week, and later called to say he could no longer manage the account.

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

My father is stressed he will lose his full pension.

Is there a fallback position based on unsound planner advice and lack of consultation (which may have been blamed on COVID)? My father has had no meetings with the planner for years, with the exception of an ad hoc one- or two-minute call. - Jen

Jen, the information you have provided me about your dad's experience with a financial planner is really bad.

The royal commission into the banking, superannuation and financial services industry would have been keen to hear about it.

But your dad's situation - the original planner retiring and a second planner making the changes, then no longer managing your dad's portfolio - does not leave you alone. Changing a client's portfolio from shares to an annuity, or anything else for that matter, without authority is outrageous.

I'd suggest you call the financial planning business and lodge a complaint. The advisers, retired or not, are required to keep a detailed file on your dad. This file will cover why changes were made.

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

Now we move to the sale of the house. If he does sell, he will be assessed under the single non-homeowner assets test. He can have more than $800,000 in assets and still get some pension.

Here we move into a great deal of complexity when it comes to investments, maximising his income while minimising tax and also seeking to maintain a pension.

One key fact is how much the house will sell for, but there are many others. You and your dad really need to sit down for several hours with a fee-charging adviser and get all the facts on the table: how much income your dad needs, his views on estate planning, getting a will in place, maximising his pension and so on.

I appreciate your dad has had one bad experience, but since the royal commission, the focus on the quality of advice, training and standards has broadly improved. Chat to friends, your accountant or your dad's super fund and find a professional, fee-charging advisor.

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