Opinion
New NSWTAG fee impacting vulnerable plaintiffs
24th Jun 2016
Recent fee changes at the NSW Trustee & Guardian (NSWTAG) will leave most privately managed clients worse off.
The new fee means that plaintiffs with private managers will have been undercompensated for the cost of funds management.
- The IPART review – existing fee (up to $2,000 per annum) removed
In 2014 the NSW Government asked the Independent Pricing and Regulatory Tribunal (IPART) to review the NSWTAG.
As part of this review IPART looked at the NSWTAG systems for private financial management.
IPART noted by way of background that:
- The Supreme Court and the Guardianship Division of the NSW Civil and Administrative Tribunal have the power to make private financial management orders.
- These orders appoint an individual or individuals to manage the affairs of a person who the Court or Tribunal finds to be unable to manage their own affairs.
- While private managers are responsible for the day to day financial management of protected persons, NSWTAG is required to oversee and direct these managers.
- In 2013, there were 3,920 private financial management (PFM) clients. Most of these clients are managed by family members while around 10 per cent are managed by private trustee companies.
NSWTAG recommended fee increases to support its private management area.
IPART recommended the removal of an ‘income’ fee that was capped at $2,000 per annum, noting the need for increased efficiency.
The IPART-recommended income fee removal will take effect from 1 July 2016.
- NSWTAG’s new 0.4 per cent fee (up to $12,000 per annum)
In recent months, NSWTAG has written to all family member PFMs (but not trustee companies) demanding that they start to pay a new surety bond fee.
This fee will cost protected persons 0.4 per cent of the sum being managed, to be paid as an annual insurance premium (capped at $12,000 per annum).
The surety bond insurance premium means that if a family member mismanages the money, the money can be replaced and the family member sued by the insurance company.
- Funds management and private managers
As a plaintiff lawyer, you know what it’s like. It’s tough to negotiate damages for funds management.
In smaller cases, defendants and their insurers strongly oppose having to pay for a private trustee company to act as financial manager.
Unsurprisingly, a family member will sometimes put up their hand to take on this unpaid and onerous role. They do it to help save their loved one money.
However, now the protected person will be forced to pay mandatory insurance premiums.
Paying this fee will not deliver any additional help or assistance to their family member acting in the role of private manager. It will simply make it easier for them to be sued.
This cost was never factored into claims for funds management involving private managers.
It is too late now to go back to the defendants and ask for more money to enable a private trustee company to take over the role.
- The implications
The implications for protected persons are clear – they will have a new cost to bear, which will mean spending less on other needs.
The implications for existing private managers are clear – they must pay the fee or they will be removed from their role. If they pay the fee and remain in place they will need to be very careful or they will be sued.
The implications for NSWTAG seem clear – they have effectively outsourced their role in supervising private managers.
The implications for plaintiff lawyers at this stage are:
- Fight hard in settlement conferences to push for private trustee company funds management fees, even in small cases.
- Make sure family members who are considering offering to take on the role are fully informed. If they decide to proceed make sure your funds management quote includes this new 0.4 per cent per annum fee.
- The ALA’s role
The ALA are very concerned about the lack of consultation over this issue.
It appears that IPART were not made aware that NSWTAG would respond to demands for efficiency with new fees.
Lawyers need to know what NSWTAG fees are so that they can appropriately guide their clients on the options and the associated costs.
Matters settled in recent months have done so in ignorance of a new fee that has obviously been a long time in the planning – to the great disadvantage of vulnerable plaintiffs.
The ALA has sought to meet with NSWTAG and has now also written to the Attorney-General.
The issue has been picked up in Parliament (click here) and also in the media (click here).
.jpg)
Jane Campbell is a financial adviser and lawyer at Aeran. She provides independent financial advice to seriously injured Australians. Jane is passionate about improving financial outcomes for injured people.
The views and opinions expressed in these articles are the authors' and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).
Learn about how you can get involved and contribute an article.
CONTACT DETAILS
SEND ENQUIRY