A pensioner who had difficulty paying her monthly life premiums since 2012 and claimed her adviser had provided “inappropriate” financial advice has substantially won her dispute. 

She had signed a statement of advice (SOA) in 2004 for a managed investment fund and the life policy with her adviser, an authorised representative of AMP Financial Planning. 

The SOA recorded that she had a total income surplus of $3075 once total income of $14,903 and expenditure of $11,828 – inclusive of premiums of $1,828 – were taken into account. A later amendment showed the premiums were increased to $2178 at the start of the policy.  

The alteration left the pensioner with just $2725 in total surplus income after the premiums were paid and there appeared to be no recorded liabilities or major assets which may need additional protection in the event of the pensioner’s death. 

Materials provided by the parties indicates the complainant was struggling financially with the monthly premiums as she was on a pension that was not increasing in a manner which would match the increases to the policy premiums. 

Every year since 2015 she had contacted her adviser by telephone and email about her struggles to keep up with the premium payments, which were rising annually. During this period her financial circumstances and medical conditions remained the same. 

At the time of raising the concern with the adviser in 2015, the premium quotations for similar cover of $250,000 were $735.81 per month or $8830 per annum. This was well above the complainant’s ability to service and was not accounted for in the 2004 SOA. 

The 2004 SOA fell outside of the Australian Financial Complaints Authority’s (AFCA) time limit rules to accept a dispute. 

However the ombudsman says the case is within its jurisdiction as the complaint over the adviser’s conduct in 2016 and 2021 just comes within the 6-year period time limit rules because the pensioner lodged her complaint on October 13 last year. 

AFCA ruled substantially in the pensioner’s favour, noting there was an opportunity to address her concerns in 2016 and 2021 by providing advice to the complainant on her options. She was seeking $199,768.61 in compensation which is the sum of all premiums paid since the policy began. 

“The 2016 and 2021 requests for advice were an opportunity to canvass options which should have been considered in the 2004 SOA,” the AFCA ruling says. 

“There were other options available to the complainant to meet her objective of leaving money behind for her children, who were no longer dependent, which would not have placed an ongoing financial burden on her and the children in meeting the premium payments each month.” 

AFCA says the appropriate advice in 2016 would have included cancelling the policy and placing the premiums in the investment portfolio. 

Whilst this would have meant forfeiting the $199,758.61 already paid in premiums and the lump sum cover, it would have aligned better with the pensioner’s goals. 

“The complainant was deprived of the opportunity to build her investment account using the premium funds instead of continually paying amounts towards the policy,” AFCA says. 

“Given this, the complainant has suffered a loss due to the breach of the financial adviser in not providing further appropriate advice.” 

Emails from 2015 to last year suggest that the premiums were becoming unsustainable for the complainant and she specifically requested in 2021 whether there was another product that they could seek to reduce costs. 

“The advisor confirms that he considered this in 2016 and there were no products which could assist due to the complainant’s health issues,” the AFCA ruling says. 

AFCA says the calculation for loss suffered would apply to those policy premiums paid between October 14 2016 and October 13 last year plus interest on the refunded premiums from April 14 2019 until the date of payment by the financial firm. 

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