21 Sep 2009

Financial adviser ordered to pay damages to widow

5:53 pm on 21 September 2009

A widow has been awarded almost $260,000 by the High Court in Napier, after she was urged by a financial advisor to mortgage her home to invest in a property company that later failed.

The Blue Chip group collapsed last year, owing investors about $70 million.

Financial advisor VPFS Financial Planners has been ordered to pay more than $204,000 in damages for negligence and $54,000 in costs to Napier woman Beryl Breeze.

The High Court has ruled the advice given to Mrs Breeze was wholly deficient, leading to an unsuitable investment.

Lawyer Neil Thinn says the ruling means advisers who advise elderly investors to move to risky investments from previously conservative portfolios may find themselves liable.

Mr Thinn says it still remains to be seen whether the company can pay his client.

More claims expected

The Institute of Financial Advisers says there could be a flood of claims as a result of the case.

President Lyn McMorran says the ruling could be very damaging for advisers, who must ensure they have sound procedures in place.

She says a lot of advisers themselves probably got caught in the hype surrounding Blue Chip.