Written by Peter CarterJune 26, 2019
A financial planner whose too “low key” investment advice to a seriously injured motor accident victim resulted in her funds being depleted has been ordered by a court to pay compensation for the financial loss she sustained.
Michelle Bankier was a passenger in a motor vehicle driven by her mother in 1997 when she suffered spinal injuries and another passenger died.
Those injuries and bowel complications caused her to complete her final year of high school over two years achieving an OP of 4. Her tertiary study of marine biology initially led her to a career of surf photography.
The amount available for Michelle’s investment out of the $1.2 mil damages settlement she received in 2002 was $1.13 mil.
For that she consulted Anthony Avery of Avery Financial Planning, to provide financial advice.
In 2006 her portfolio was worth nearly $1.6 mil, but by the end of 2008 – as a result of Michelle’s spending and some unsuitable investments – its value was just $700k.
The source of the dissipation of a significant portion of the funds was Michelle’s passion for photography.
She had some initial commercial success in shooting surfing competition pics but the cost of international travel and a lease of space for a photo gallery proved to be unsustainable.
Her business plan was chaotic, and expenses turned out to be far higher than anticipated. The business never turned a profit.
Avery advised her to close it in October 2008 even if she couldn’t assign the lease.
Putting a stop to business expenses to reduce the drag on her other income and the capital which was supposed to look after her for the rest of her life had now become urgent in his mind.
As we shall see below, that warning was too little, too late.
One of Michelle’s next ventures – which the financial planner denied he encouraged her to pursue – was to purchase an investment unit at Palm Beach.
That turned to out to be reasonably successful in terms of capital gain going from $395k in 2005 to $875k in 2018.
The rental however did not initially cover the loan repayments, meaning that the income available to her from other investments was reduced.
Avery was sacked as financial advisor in June 2010 and Michelle sued his company alleging he ought to have warned her against high spending, generous gifts and improvident investments.
In the dispute heard in the Supreme Court at Brisbane before Justice Glen Martin over 8 days in July and August 2018, Michelle swore the advisor had said the proceeds of her settlement would generate an “annual wage” of “at least an $80,000” and because “you’ve got over a million dollars, you…..would never have to worry about money again”.
She was disbelieved as to some of the assurances she attributed to the advisor.
Justice Martin observed Michelle did “tend to see her world through rose coloured glasses” but that such behavior “would be obvious to Mr Avery”.
“Although he was not her guardian or fiduciary”, ruled the judge, “he was aware of the purpose of which the award was made” and ought to have given more robust warnings and advice.
Avery’s warnings up until October 2008 about Michelle’s spending habits were – he concluded – “fairly low key”.
Generally along the lines that part of her portfolio would have to be sold to pay for travel or so on, no connection had been drawn by him between the spending and the dissipation of her capital and the effect that would have on her future.
But wasn’t it Michelle’s own decisions that led to her loss?
The advisor contended exactly that but in the absence of what the court considered to be adequate warnings from him as to the dangers of the investment being dissipated, it could not be said that it Michelle had contributed to the loss she suffered.
The amount that the investment company must pay to its former client will be decided by the court in a further determination in the coming weeks.