Elizabeth Coetzee, a financial planner who challenged her banning from the ranks of the Financial Planning Institute (FPI) after being stripped of her accreditation as a Certified Financial Planner (CFP), has lost her case in the Supreme Court of Appeal.
The Supreme Court confirmed the judgment handed down by the Western Cape High Court in September 2013 in favour of the FPI against Coetzee. Her appeal was dismissed with costs on November 28.
The Western Cape High Court had upheld a finding by the FPI’s disciplinary tribunal in June 2007 that Coetzee was guilty of unprofessional conduct. It also upheld the tribunal’s decision to suspend her membership of the FPI.
The case stems from a complaint lodged with the FPI against Coetzee for charging excessive fees on the back of bad advice, and for acting contrary to her mandate.
Coetzee charged a 77-year-old widow commission of R900 000 for moving funds out of a family trust’s share portfolio into two unit trust funds that had substantial exposure to high-risk equities, despite the widow’s request to lower her exposure to risk. The widow was not informed that the transaction would attract significant capital gains tax.
The Supreme Court judgment says the FPI found that Coetzee’s client, Mrs W, had instructed her to “protect” the share portfolio housed in the trust against a drop in the share market. However, the advice given by Coetzee to invest in two Stanlib funds was “not reasonable and professional”, because it did not achieve the mandated objective.
The FPI also found that the commission charged by Coetzee was neither fair nor equitable.
Court papers record the background to the FPI’s disciplinary proceedings against Coetzee as follows:
Mrs W had no business acumen, and spent her life as a wife and mother. She left financial matters to her husband, who died in 2002.
The late Mr W had successfully managed the investments of the family trust in the form of a portfolio of blue-chip shares.
For years, the share portfolio had produced dividends that comfortably funded the beneficiaries’ income requirements.
After Mr W’s death, his widow was approached by Coetzee’s mother, Marie Swanepoel, who had been Mr W’s financial adviser. Swanepoel assured Mrs W that “they” would “look after her”.
When Mr W was alive, the family trust had been administered by PSG, but after his death, Swanepoel advised Mrs W to replace PSG with Sanlam, for whom she was an agent. Mrs W followed this advice.
A representative of Sanlam advised Mrs W to sell some of the shares held by the trust and replace them with others, which she did. As a result, the income of the trust almost doubled.
After that, Ms W left the management of the trust to Coetzee, also a financial adviser.
Coetzee told Mrs W she had been approached by Liberty Life to run a financial advisory franchise.
According to Mrs W, in 2005, Coetzee advised her to sell R30 million worth of shares and reinvest the money in low-risk investments, such as property-linked investments, because the share market was going to fall sharply in the near future.
Coetzee’s version was that it was Ms W who was having sleepless nights about the volatility in the market, and so Coetzee advised her to use R25 million of the profit made by the trust to diversify into investments with Stanlib, an asset manager linked to Liberty Life, or another asset manager, Bastion.
In August 2005, R30 million was invested in the Stanlib Managed Flexible Fund and the Stanlib Multi Management High Equity Fund.
Coetzee admitted she received a commission of R900 000 for investing the money in the Stanlib funds and that her ongoing commission increased to 0.5 percent a year from 0.15 percent a year when the portfolio was transferred to Sanlam.
When the share market did not fall and Mrs W was advised by her auditors that only R12 million of the R30 million had been invested in a lower-risk fund and the rest was still in a higher-risk fund, she laid a complaint with the FPI in July 2006.
Coetzee sought a review of the FPI’s finding in the High Court, which was dismissed with costs. She was then granted leave to appeal to the Supreme Court on the grounds that one of the charges that formed the basis of her conviction by the FPI had not been properly drafted. As a result, she alleged she was not fully aware of the nature of the charge against her and was prejudiced in preparing her response.
But the Supreme Court found that the charge had been properly put to Coetzee and that she had been afforded the opportunity to defend herself.
In a media statement released last week, Godfrey Nti, the chief executive of the FPI, said the Supreme Court’s decision affirms the FPI’s right, as a professional body, to act in the public interest and in the interests of the more than 4 600 planners who have the CFP accreditation.