1. Litigation – The Ultimate Reality Check Tim Nethercote & Grant Holley Compact – Compliance & Corporate Training November 2006

2. Some background to our story

3. Scene 1: The interview

4. The Fact Find  3 children – 2 months, 4 & 8 – want private school secondary education  Brooke 33, physiotherapist. Not working and plans to stay at home  Cess 35, plumber, now self-employed  Both plan to retire at 60  Brooke risk averse. Cess has more aggressive risk profile  Brooke has $100,000 in term deposit for children’s education  Cess likes mountain bike riding  Repayments on loan of $350,000 = $2,350/month  Neither have wills

5. Fact Find  Because Cess now self-employed, no more employer super payments but has super in an industry fund  Cess’s income in new job approximately $120,000 pa  Net assets worth $230,000  Income surplus of $16,749 pa  Both want to retire at age 60 on net annual income of $50,000

6. The SoA Recommendations  Use equity in their home to borrow $250,000 via an Equity Access loan for investment purposes  Place borrowed funds and the $100,000 term deposit into the Avantguard Premium Service High Growth Portfolio  Roll over funds from the industry superannuation fund to the Avantguard Retail Superannuation Fund  Purchase $600,000 Avantguard term life cover on Cess’s life so as to discharge the mortgage and investment loan in the event of Cess’s death

7. THE SUPREME COURT OF VICTORIA AT MELBOURNENo. 2006 No. 123456 COMMON LAW DIVISION B E T W E E N:- BROOKE POOLE Plaintiff (in her own capacity and as executrix of the will of Cecil Poole) -and- SUREFIRE FINANCIAL SOLUTIONS PTY LTD First Defendant -and- IAN SURE Second Defendant -and- SAFEGUARD FINANCIAL GROUP PTY LTD Third Defendant

8. SCENE 2 - IN COURT

9. Ms Money Penny Term deposit low risk with fair returns; Avantguard Premium Service High Growth Portfolio greater risk; Advisers should explain the nature of such risks to the client;

10. Ms Money Penny The Growth Portfolio was suitable for Cess’s profile but not Brooke’s; Over last 2 years, terms deposits returns were 5.5%, Growth Fund 1.3%-2%; and Financial Plan did not properly consider the education goal.

11. Mr Life B. Init Income protection and/or trauma cover should have been considered. Sufficient funds for the children’s education and a fund to provide an income in the event of Cess’s death should have been considered. Term insurance on Brooke’s life should also have been considered. The superannuation switch was not justified.

12. Mr Jimmy Doright Gave evidence of procedures, manuals, training, compliance reviews, approved products lists, etc that Safeguard had in place

13. SCENE 2 - IN COURT

14. SCENE 3 THE JUDGMENT

15. Judgment on causes of action  Corporations Act  Negligence  Breach of retainer  Misrepresentation – ASIC Act

16. Corporations Act s945A A provider of financial product advice must only provide the advice to the client if: (a) the provider: (i)determines the relevant personal circumstances in relation to giving the advice; and (ii)makes reasonable inquiries in relation to those personal circumstances; and

17. Corporations Act s945A (continued) (b) having regard to the information obtained from the client in relation to those personal circumstances, the provider has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all the circumstances; and (c)the advice is appropriate to the client, having regard to that consideration and investigation.

18. Common Law Negligence  Duty of Care (arises from the professional relationship)  Breach of Duty of Care (failing to act as a reasonable adviser in the circumstances)  Damage (a reasonably foreseeable consequence)

19. QUESTIONS & COMMENTS

20. Court adjourned