HLB's Dealings with Ms Jordan
40 When Ms Jordan first approached HLB in 2005, she was almost 49 years of age. At that time, she was in the throes of divorce from her husband of 25 years whom she had first met in 1972.
41 Ms Jordan completed Year 9 at Warilla High School and three years later completed Year 10 at night school at Gymea TAFE. After leaving school, she trained as a secretary and completed secretarial courses in the evening at Gymea TAFE. Ms Jordan was employed as a secretary for approximately twelve years, commencing in 1973. She said that she had had "… no accounting or finance experience" as at November 2006.
42 In 1985, Ms Jordan ceased full-time work as a secretary. In March 1985, she gave birth to her first child, a daughter. She had her second child, a son, in May 1987. She has not worked in paid employment outside the home since early 1985.
43 At pars 12 to 15 of her affidavit sworn on 30 March 2012, Ms Jordan said:
12. During the course of our marriage I paid the household bills, including the food bills and utility bills from my husband's wages. I was aware of mortgages over the property of the marriage, because I was named on them and I knew that my ex-husband owned some shares. During the course of our marriage, I assumed that all of the assets and investments of the marriage were in my husband's name, apart from the houses that we lived in over the years, which were in both of our names and a small investment in Macquarie shares that was made in my name the late 1980's.
13. Robert Jordan [Ms Jordan's ex-husband] is currently the Managing Director of Australia and New Zealand division of the Westfield Group and he also manages that company's interests in the United States. As the MD of Westfield, I believe that Robert Jordan had a large amount of experience in making investments and in business and finance generally.
14. During the course of my marriage, I did not ask my husband about the family finances or the nature of and extent of our assets. He was never interested in discussing finances with me and I was happy to let him manage them. I believe that I lacked experience and consequently he handled all of the family investments. I really had no idea about the extent of the family assets during the time that I was married to Robert Jordan, apart from the fact that during the course of my marriage, I became aware that Robert Jordan had shares in Westfield. I knew this because from time to time I would see dividend cheques come into the house and I would have to bank them at his request.
15. I was aware, however, that Robert Jordan used the services of a financial advisory firm, HLB Mann Judd for our taxes. I recall Robert Jordan telling me that he used two other accountants for his share investments, but I do not now recall who those accountants were.
44 Ms Jordan said that she was introduced to HLB by her best friend, Ruth Preen. Ruth Preen's husband, Stephen, worked at HLB. Coincidentally, he was a member of the HLB Investment Committee. Also, Ms Jordan's ex-husband had used the services of HLB over the years and she said that, if HLB was good enough for her ex-husband, they would be good enough for her.
45 Ms Jordan said in her evidence-in-chief that she first approached HLB in about November 2006. She said that, at that time, she agreed on the terms of a property settlement with her ex-husband. She received $7 million in cash in that property settlement. She used approximately $1.5 million of that $7 million to purchase a home for her children and herself at Taren Point and placed the remaining $5.5 million with HLB to invest on her behalf. At pars 19 to 21 of her 30 March 2012 affidavit, Ms Jordan said:
19. Prior to receiving the funds, I spoke to Ruth Preen about retaining a financial advisor, given that I had very limited experience with financial affairs and had just come into a large sum of money. I had to decide who was going to be my financial advisor. I needed someone I could trust given that there were a lot of accountants and financial advisors in Sydney. I had no experience in these matters and I had just come into a lot of money.
20. I decided that I wanted to retain Stephen Preen at HLB Mann Judd. I trusted Stephen to look after my financial affairs and was very comfortable because I knew him so well. I also felt that if HLB Mann Judd were good enough for my ex-husband, Robert, they would be good enough for me.
21. I recall that in or around November 2006, Ruth Preen had a conversation with me in which she said:
"Stephen said that he does not want to look after your finances directly but Michael Hutton is an expert in investing and will be able to help."
46 In her affidavit, Ms Jordan did not mention having met with Mr Hutton in September 2005. Nor did she refer in that affidavit to any telephone conversations which she had had with him in the months of August, September and October 2006.
47 In his affidavit sworn on 11 May 2012, Mr Hutton gave a detailed account of a meeting which he had with Ms Jordan on 26 September 2005. He also recounted the substance of six telephone conversations between Ms Jordan and him in the months of August, September and October 2006. Mr Hutton's evidence of these discussions was based upon and supported by contemporaneous file notes made by him.
48 Counsel for the respondents cross-examined Ms Jordan about the 2005 meeting and the six telephone conversations. Despite being closely questioned about these discussions, Ms Jordan said she was unable to remember any of them. She went on to deny having had six telephone conversations in the months of August, September and October 2006. She accepted that she may have had one conversation but said that she had definitely not had six.
49 I pause to observe that, during her oral testimony, which occupied approximately 1¾ hours, Ms Jordan said "I can't remember", "I can't recall", or words to that effect, more than 90 times. The frequency with which she used that expression was very noticeable. I will set out a few questions and answers from the early part of her cross-examination in order to illustrate the point. At Transcript p 14 ll 26-39, the following exchange took place:
Well, but you accept that you may have had at least one telephone conversation with Mr Hutton before the end of October 2006?---I really can't recall. I can't recall, I'm sorry.
I think, earlier this morning, you were asked some questions about discussing financial goals with Mr Hutton. Am I right in recalling that you can't remember whether that was one discussion or more than one discussion?---No, I can't recall if it was more than one discussion.
It may have been more than one discussion, correct? And those discussions or - let me withdraw that. You discussed your financial goals with Mr Hutton before you handed over the cheque to which you refer in mid November 2006, correct?---Well, I don't - can't remember if I handed it - said that after I handed over the cheque or just in that meeting but I did say it.
50 I have no difficulty accepting that Ms Jordan is unsophisticated. I also appreciate that she did not remain at school beyond Year 9 and has not received any tertiary education beyond the TAFE courses she attended in 1972 and 1973. In 2005, she lacked experience in managing her own financial affairs: Until her divorce she had relied entirely on her husband and trusted him to obtain appropriate advice when required. On the other hand, she did not appear to me to be incapable of grasping even difficult concepts and did not present as a person of low intelligence. I formed the impression that she had decided to say "I don't recall" in many of her answers in order to forestall cross-examination on the topics about which she was being questioned. This was particularly so when the September 2005 meeting and later telephone conversations were raised with her. It was also the case when the written advices and monthly reports given to her by HLB were mentioned. In the end, however, it does not matter whether her answers were a deliberate attempt to deflect difficult questions or just the result of poor memory. The result is the same. There is no contest of any importance between Ms Jordan's evidence and that of Mr Hutton as to the substance of their dealings or the timing of them.
51 Ms Jordan did not file any evidence in reply to Mr Hutton's affidavit nor did her Counsel challenge any part of Mr Hutton's account of his dealings with Ms Jordan.
52 In those circumstances, I accept all of Mr Hutton's evidence and find that his dealings with Ms Jordan took place as he said. He did not have a perfect recollection of those dealings but he did have quite a good recollection of them. He was also aided by file notes. My acceptance of Mr Hutton's evidence extends to his account of the reasoning process which he employed when putting together Ms Jordan's investment portfolios in November 2006.
53 Mr Hutton said that he met with Ms Jordan on 26 September 2005 and that the duration of the meeting was 1.7 hours. He used his diary and time record to refresh his memory. At pars 3.5 to 3.15 of his affidavit, Mr Hutton said:
3.5 I do not remember everything that was said during the September 2005 Meeting. However, having refreshed my memory by reading the Fact Sheet, I recall that, during the September 2005 Meeting, I asked a number of questions and Ms Jordan told me words to the following effect:
(1) "I am going through a divorce. I have been married for 24 years."
(2) "I need you to complete my 2005 tax return and give me financial advice regarding my divorce settlement once it comes through.
(3) "The divorce process has taken 1½ years so far. At the moment it's a 45:55 split, with me getting $5.2 million and my husband Robert getting $5.8 million. I will try for a 50:50 split."
(4) "Robert has been at Westfield for about 17 years. He's the Chief Operating Officer for Australia and New Zealand."
(5) "I'm living in the same house as Robert at present. My aim is to buy a new place with a water view for $1.5 million to $1.8 million."
(6) "I was born on 18 October 1956 and am 48 years old. Robert was born on 26 November 1953."
(7) "Robert owns Westfield shares worth about $7 million. I've got about $100,000 in the Commonwealth Bank. We jointly own our home. It's worth about $3 million. I don't want to keep the house: it's too big a block. I also own a Mercedes E240. Robert owns an Audi TT."
(8) "I don't have any debts, apart from credit card bills and lawyer's fees for the divorce."
(9) "I don't have any super or personal insurance."
(10) "I have two children. My daughter, Carlie, is aged 20. She's studying Arts/Psychology at Wollongong Uni. She also works at K-mart 4 days a week. My son Andrew is doing the HSC at Newington. He wants to do Commerce/Law at Macquarie."
(11) "I am thinking of retraining and going back to work, but I haven't worked for 20 years." (I recall thinking it was unlikely that Ms Jordan would return to the workforce).
(12) "My main priorities are to buy a house for myself and the children, and to generate an income to live on. I don't want something that requires me to do a lot of administration. It should be tax efficient."
3.6 During the September 2005 Meeting, l also showed Ms Jordan a number of printed "slides" which I kept within a folder and was in the habit of using when first meeting with a new client. Exhibited and marked MGH19 are copies of the "slides" that I showed Ms Jordan during the meeting (Slides).
3.7 As I showed Ms Jordan the Slides, I spoke about the matters referred to in each of them. I cannot remember everything that I said to Ms Jordan about the matters referred to in the Slides. However, amongst other things, I said words to the following effect:
(1) "You're only 49, which means you're going to need a good long-term portfolio that maintains value after allowing for the impact of inflation, and generates enough income for you to live off it for the next 30 years or more."
(2) "It is important to have a portfolio of investments that is diversified, so that you don't have all your eggs in one basket. You don't want to be overly reliant upon the success of a single investment or asset class."
(3) "We have designed a model balanced portfolio, which has diversification across asset sectors and is diversified within each asset sector, by investing in more than one fund manager or product. It is designed to generate income and growth over the long term from a range of shares and managed funds."
(4) "The model portfolio is summarised on this slide [slide 9 at MGH19]. It invests 25% in income related assets, 65% in growth assets (split up into 40% Australian shares, 20% international shares and 5% in Property), and the remaining 10% is invested in Absolute Return or Hedge Funds. The aim of the Growth component is to invest in Australian and International shares, both through managed funds and directly, with a view to matching or exceeding the performance of the share indexes. The Absolute Return Funds aim to produce a positive return even when the capital market is failing or fluctuating: they are intended to stabilise the overall portfolio returns when other sectors are experiencing adverse market conditions."
(5) "The portfolio can be made more or less aggressive by increasing or reducing the income component above or below 25%."
(6) "An alternative way to go is to invest the lot with a company such as MLC, which then spreads the money between a variety of different fund managers across different investment sectors. This slide [slide 10 at MGH19] shows the sector allocations and fund managers used by MLC in its Horizon 4 fund. The funds go from Horizon 1 (which is all cash) to Horizon 6 (which is all shares)."
3.8 The last of the Slides (slide 15 at MGH19) refers to a "client pack", including a "Financial Services Guide" and a "client questionnaire". At my first meeting with any financial planning client, it was in 2005 (and it remains) my practice to provide the client with a "pack" of documents which included a brochure about HLB, HLB's Financial Services Guide, and a client questionnaire. I cannot remember giving those documents to Ms Jordan at the September 2005 Meeting, and I may not have given her a copy of the client questionnaire. However, I believe that I did provide Ms Jordan with the HLB Brochure and Financial Services Guide. A copy of the Financial Services Guide current as at September 2005 is exhibited at MGH20. Although HLB's Financial Services Guide has been updated (e.g. for contact details and fee scales) over the years, I do not recall any substantial amendments being made to the content of it after September 2005, apart from ownership details for Lonsdale.
3.9 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx I update the Asset Class Returns Chart that I use about once a year, after 30 June. I showed the Asset Class Returns Chart to Ms Jordan during the September 2005 Meeting. Exhibited at MGH21 is the version of the Asset Class Returns Chart that I showed Ms Jordan during the September 2005 Meeting.
3.10 When showing Ms Jordan the Asset Class Returns Chart, I said to her words to the following effect:
"This chart shows the different asset sectors you can invest in. The yellow squares highlight the best performing sector in each year. You can see that each sector has a different level of return each year, and the returns can vary a lot from year to year. We believe it's a good idea to have investments in each of the sectors to give a steadier level of return. There will still be volatility - same good years and some bad years - but you reduce the volatility overall by having a range of investments."
3.11 I also said words to the following effect to Ms Jordan during the September 2005 Meeting:
(1) "Because you probably won't have any other income, it's best to set up a direct credit arrangement where a fixed amount gets deposited into a bank account every month for you to live on. If you just wait until there's a dividend payment or income distribution from the investment portfolio, it's a bit unpredictable and uneven: you won't really know how much cash you'll have (from month to month."
(2) "We should also consider making superannuation contributions to minimise the tax on your portfolio."
(3) I also explained to Ms Jordan, with reference to a slide in my presentation pack, how our fees are charged. There was to be no charge for our initial meeting, but should we go ahead and provide a Statement of Advice, and if she accepts that and we implement the recommendations, then at that point there would be a charge of 1.1% or the first $1,000,000 invested ($11,000). From then on our monthly fees would be charged on the basis of the portfolio value, at a sliding % age rate, as shown on the chart in the presentation pack.
3.12 At no time during the September 2005 Meeting (or at any time thereafter) did Ms Jordan say words to the effect that she was risk averse, preferred a conservative investment approach or wanted investments that were secure. She never said words to the effect that she was uncomfortable with or did not understand the portfolio of investments I had discussed with her. I understood Ms Jordan to be comfortable with a model balanced investment portfolio, and with holding a mix of shares and managed funds across different sectors.
3.13 Nor did Ms Jordan tell me during the September 2005 Meeting (or at any time thereafter) that one of her goals was to double her money by the time she died; or that she wanted to make sure that there was enough money for her children to live comfortably after she died.
3.14 Ms Jordan did say wards to the effect: "I'm not sure Robert will provide for the kids, so I'll have to provide a home and living expenses for them. I feel responsible." I understood this to be a reference to her children's accommodation and living expenses for the next few years, while they were studying and establishing themselves. However, I understood that the average life expectancy for females in Australia was about 84 years, which meant that Ms Jordan's children were likely to be in their 50s by the time she died.
3.15 I understood from the September 2005 Meeting that Ms Jordan was not an experienced or sophisticated investor. However, she did not express or appear to have difficulty understanding what I was telling her. I believed that she had raised high achieving children, had been married to a successful husband, was relatively well off and was not suffering from any disability or incapacity, and understood that a large portion of her family's wealth was tied up in Westfield shares.
54 Mr Hutton said that he had a telephone discussion with Ms Jordan on 10 August 2006 which lasted approximately half an hour. It was in that conversation that Ms Jordan told Mr Hutton of her divorce settlement and the quantum thereof: $7 million in cash plus cars. She said that she currently spent $14,000 per month on living expenses and needed funds to cover her contribution to her children's university fees. At par 4.4 of his affidavit, Mr Hutton said:
4.4 Having refreshed my memory by reading my file note, I also recall that during the telephone conversation on 10 August 2006, I said to Ms Jordan words to the following effect:
(1) "If you're currently spending around $14,000 per month, let's start off with a drawing of $15, 000 per month into your bank account, for living expenses, and we'll see how things are going once you've settled in to the new house. This can be reduced later, when the kids are more in charge of their own finances" (Ms Jordan said words to the effect that she agreed).
(2) "If you can invest $5 million, you will be in very good financial position. If you're spending $14,000 per month, that's $168,000 per year. Before tax - (assuming we use super and have a tax rate of 15% - you'll need your portfolio to generate about $200,000 a year. That's under 5% of $5 million, so it's achievable."
55 On 28 August 2006, Mr Hutton and Ms Jordan again spoke by telephone. She mentioned in that conversation that she was, at that time, looking for a house for her and her two children in the price range of $1.2 million to $1.3 million.
56 On 8 September 2006 and again on 14 September 2006, there were further telephone discussions.
57 On 16 October 2006, Ms Jordan told Mr Hutton that her divorce settlement would be completed on 13 November 2006 and that, after she had purchased a house, there would be approximately $5.5 million remaining for investing.
58 On 17 October 2006, Mr Hutton prepared an action sheet and a plan note in respect of Ms Jordan. He gave a copy of these documents to Chris Hogan. At pars 5.2 to 5.7 of his affidavit, Mr Hutton said:
5.2 I refer to my Plan Note and say that, based on my discussions with Ms Jordan up to that time, it was my opinion that:
(1) $1 million of Ms Jordan's divorce settlement ought to be deposited in a Superannuation Wrap Account with BT, and those funds invested in the Russell Balanced Fund (a multi-manager fund with a 70/30 asset allocation between Growth and Income sectors).
(2) $4.2 million of Ms Jordan's divorce settlement ought to be deposited in a Personal Wrap Account, and those funds invested in accordance with HLB's model balanced portfolio.
(3) The remaining $1.8 million of Ms Jordan's divorce settlement would be required to fund the purchase of a house, stamp duty, set-up costs and legal costs.
5.3 The principal reasons why I concluded that HLB's model balanced portfolio (as opposed to a more "conservative" portfolio) was suitable for Ms Jordan were:
(1) Her age and the long-term nature of her investment. Ms Jordan was under 50 years of age and on normal life expectancies could be expected to live for another 34 years or more. This led me to believe that it was essential to have a portfolio that could deliver long-term capital growth in excess of inflation.
(2) Her lack of any other source of income. This led me to believe that the portfolio would have to generate regular income sufficient to fund Ms Jordan's living expenses for another 34 years or more. Largely for this reason, I decided that it was appropriate to invest a large portion of Ms Jordan's Australian equities allocation (nominally part of the Growth component of the model balanced portfolio) into the Lonsec Model Income Share Portfolio, which comprised a select group of shares that were expected to deliver a high yield (dividend income), as opposed to high capital growth.
(3) The need to ensure the portfolio was tax effective. Since most of the portfolio would (to begin with) be held by Ms Jordan personally (i.e., not in superannuation or a trust structure), I believed that it was unwise for her to derive unnecessarily high amounts of personal income (on which a marginal tax rate would be payable), as opposed to deriving capital gains (only half of which are taxed at the marginal rate and only when realised) and earning imputation credits from equities.
(4) The fact that she would own her own home, had no substantial liabilities, and her children were attending university. I believed that it was reasonable and prudent for a person in Ms Jordan's position to accept a level of investment risk that would not have been appropriate if, for example, she had very young or disabled children, did not own her own home or had substantial liabilities.
(5) I regarded it as a fairly standard portfolio for long-term investors. I also believed that quite a lot of thought had been given to the composition of the model balanced portfolio; that each of its components had been researched and recommended by Lonsec; and that, considered as a whole, it constituted a diversified, sound and tax effective approach to long-term investing.
5.4 In arriving at my opinion that HLB's model balanced portfolio was suitable for Ms Jordan, I considered the Risk Profiles Definitions published by Lonsec (with which I was very familiar) and concluded that Ms Jordan fell between Risk Profile 4 (Balanced) and Risk Profile 5 (Growth). Exhibited at MGH29 is a copy of the Risk Profile Definitions that were current as at October 2006. I refer to those Risk Profile Definitions and say:
(1) I believed that Ms Jordan did not fall within Risk Profile 1 (Secure) because that is not an appropriate approach for long-term investors. It offers no capital growth and therefore does not provide sufficient protection against inflation. It is also likely to deliver a relatively low return over the long term; and it would not be tax effective.
(2) I believed that Ms Jordan did not fall within Risk Profile 2 (Defensive) for similar reasons. That approach is suited to short-term investors whose main emphasis is on generating an income. It would also not be very tax effective.
(3) I believed that Ms Jordan did not fall within Risk Profile 3 (Conservative), having regard to the matters I mentioned in paragraph 5.3 above; and because it was my view that a Conservative approach was suited to medium-term investors who were primarily seeking an income stream, and was not very tax effective.
(4) I believed that Ms Jordan fell between Risk Profiles 4 (Balanced) and 5 (Growth). My view was that she was an investor who needed to produce capital growth in the long-term and generate a tax effective income stream, which pointed to Risk Profile 5. On the other hand, her need for a regular income stream of about $15,000 per month, her lack of prior investment experience, and the lower level of risk associated with greater diversification pointed to Risk Profile 4.
(5) I believed that Ms Jordan did not fall within Risk Profile 6 (High Growth), primarily because of her need for a regular income stream and the higher level of risk associated with investing 100% in growth assets.
5.5 On or about 17 October 2006, when I gave him the Action Plan and the Plan Note, I spoke to Chris Hogan about Ms Jordan and instructed him to draft a Statement of Advice in accordance with the Plan Note. I also discussed Ms Jordan's portfolio and circumstances with Mr Hogan at that time and later when he was preparing the Statement of Advice, but I cannot remember what was said.
5.6 I remember giving consideration, at about that time, to establishing a family trust or a self-managed super fund for Ms Jordan, and I believe I discussed those alternatives with Mr Hogan. I decided against those alternatives due to the extra cost and complexity involved, for insufficient benefit. I also decided that gearing was not required or appropriate for Ms Jordan. I wanted to keep the investment structure relatively simple, in line with Ms Jordan's wish to have minimal administration, and I considered that this best suited Ms Jordan's needs.
5.7 I also considered whether I should recommend Ms Jordan invest the personal component of the portfolio with a "manager of managers" (such as MLC), rather than using an individual wrap account, but I decided against it, primarily for reasons of cost and flexibility. The fees charged by MLC and the like tended to be relatively cheap for investments of under $1 million, but less competitive for larger investments. I did, however, decide to recommend the Russell Balanced Fund (which followed a "manager of managers" approach) for the $1 million super component of the portfolio.
59 Ms Jordan made available to HLB the residue of her divorce settlement funds on 10 November 2006. The amount handed over was $5,510,007.
60 Ms Jordan also testified that, prior to retaining HLB, she had never sought financial advice. She said:
I basically gave them a cheque straight from the property settlement and relied on them to manage my financial affairs for me. I do not recall completing any forms or answering any questions about risk.
61 Ms Jordan suggested in her evidence that she wanted to double her money before she died and that she had informed Mr Hutton of this. Mr Hutton doubted that he was ever told by Ms Jordan that she wanted to "double her money". She said that she also wanted to have enough money to live on each month. $15,000 per month was the figure ultimately discussed as the amount she required for living expenses.
62 On 16 November 2006, Mr Hutton met with Ms Jordan and handed her a letter and the first Statement of Advice which were both dated that day. At pars 5.10 to 6.8 of his affidavit, Mr Hutton said:
5.10 I refer to the Lonsec reports annexed to the First Statement of Advice and say that I had read each of them by 16 November 2006. I had also read many prior Lonsec reports relating to the same funds in the past.
5.11 Exhibited at MGH31 are copies of documents recording the recent past performance of the "HLB Model Portfolio" and the "Lonsec Model Portfolio" as at September 2006. I had also reviewed those documents (and earlier versions of them) by 16 November 2006.
5.12 By 16 November 2006, based on the discussions I had previously had with Ms Jordan, I believed that I had sufficient knowledge of her personal circumstances and requirements to make the recommendations set out in the First Statement of Advice.
6 Presenting the First Statement of Advice
6.1 On 16 November 2006, I met with Ms Jordan (November 2006 Meeting) and I provided her with a copy of the First Statement of Advice at the commencement of that meeting. The meeting lasted about 1½ to 2 hours plus preparation time. Mr Hogan was also present xxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. I do not recall him saying anything during the November 2006 meeting. Exhibited at MGH32 is my diary entry of the meeting appointment with Ms Jordan.
6.2 During the November 2006 Meeting, Ms Jordan had her copy of the First Statement of Advice in front of her. I sat facing Ms Jordan and I turned pages within her copy of the First Statement of Advice, pointing to various paragraphs and sections, as I explained them to her. I did not read the First Statement of Advice to Ms Jordan, but I endeavoured to explain the substance of the document to her.
6.3 I first pointed out the Personal Details section on page 3 of the First Statement of Advice and asked Ms Jordan to confirm that those details were correct. I believe she did so, as no changes are made to those details, although Mr Hogan's notes on page 2 indicate that Ms Jordan mentioned additional matters.
6.4 I then proceeded to take Ms Jordan through the First Statement of Advice and summarised various parts of the document and, as is my habit, I marked some key points on Ms Jordan's copy of the document. I cannot remember what words I used when summarising the First Statement of Advice. However, it took us about 1 hour to run through the whole document. During that time, I at least drew Ms Jordan's attention to and summarised the split between the personal investment account and the superannuation account that is referred to on page 4 of the First Statement of Advice; the 6 asset classes referred to in the Investment Portfolio section on page 5 with a particular focus on the defensive hedge funds, fixed interest and cash components (as shown by my handwritten markings on Ms Jordan's copy of the first SOA); the Monthly personal payment section on page 6 (also reflected by my underlining of the amount $15,000); the undeducted contributions sections on page 9; the Investment Recommendations section on pages 13 to 15. My markings record the fact that I paid particular attention to that section, particularly the hedge funds and fixed interest and cash sections; the fund descriptions on pages 16 to 17; the Investment Structure diagram on pages 21 and 22; the information about the Russell Balanced Fund on page 20; as well as the Fees and Disclosure information on pages 26 to 28. I also corrected the disclosure information to correctly identify that I was a "director" of Lonsdale at page 28. I also pointed to the annexed Lonsec Research Reports (but I only did so briefly, so as to show Ms Jordan they were there if she wished to read them). During the November 2006 Meeting, I told Ms Jordan words to the effect that the investments we were recommending were "not capital guaranteed" and the earnings were "not guaranteed." I ran through the annexures projecting the portfolio value highlighting that these were not guaranteed and assumed an earnings rate of 8% pa - as shown by my marking of the 8% on Annexure 1 of Ms Jordan's copy. I also told her words to the effect that HLB's model portfolio "invests in sectors and funds with varying levels of risk, but it is diversified so that you will not be overexposed to any one area."
6.5 Towards the end of the November 2006 Meeting, Ms Jordan and I signed an "Acceptance and Authority to Proceed" form (Acceptance) which included confirmation that we had her details correctly recorded. Exhibited at MGH33 is a copy of the Acceptance, signed by Ms Jordan and me.
6.6 It was my practice in 2006 (and still is) to have Product Disclosure Statements for each fund that I am recommending available for the client and to offer the client a copy to take home. Many clients take them home, but others do not. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Exhibited at MGH34 and MGH35 are copies of those documents. I cannot remember whether Ms Jordan took them home with her following the November 2006 Meeting.
6.7 At no time during the November 2006 Meeting did Ms Jordan say that she was uncomfortable with my recommendations or the level of risk involved. She did not say words to the effect that she was risk averse, preferred a conservative investment approach or wanted secure investments. Nor did Ms Jordan say that she did not understand the First Statement of Advice, or what was proposed.
6.8 Ms Jordan did not tell me during the November 2006 Meeting that one of her goals was to double her money by the lime she died; or that she wanted to make sure that there was enough money for her children to live comfortably after she died.
63 In her 30 March 2012 affidavit, Ms Jordan said that she did not recall being taken through the first Statement of Advice. She accepted she was given the Statement of Advice but claimed that she did not read it. The Statement of Advice comprises 28 pages of text and eight annexures.
64 On p 5 of the Statement of Advice, the following was said:
Personal Investment Account
We recommend you establish a personal investment account with $4,210,000 (including Macquarie CMT balance).
$
Personal investment account 4,150,000
Macquarie CMT 60,000
4,210,000
We will organise the following cash movements from your Macquarie CMT.