Claiming compensation for negligent financial advice

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The ins and outs of pursuing a negligence claim

Sometimes we need to make a financial decision that is of such importance we decide to pay for professional advice. This may be from an accountant, a tax specialist, a pensions expert, a mortgage consultant, an independent financial advisor, a land valuer or surveyor.

By seeking professional input, we aim to arm ourselves with the information needed to ensure that the decisions we make are well-informed and geared towards helping us to safeguard or improve our financial fortunes rather than making them worse.

So where do you stand if you discover, months or even years down the line, that the advice you have been given may be wrong or inappropriate and where it is likely that your financial interests have been harmed as a result? Do you have the right to sue for compensation when your pension pot is smaller than you were led to believe it would be, or where you are now on the hook to pay tax and penalty charges for organising your affairs in a way advocated by your accountant, but which is objected to by HMRC?

As Senior Professional Negligence Associate, Rebecca Beynon-Phillips explains that the answer to this question will depend on two things. Firstly, whether the advice you have been provided with is so out-of-step with what it ought to have been that it can properly be classed as amounting to professional negligence; and secondly, whether the financial harm caused by the advice is of sufficiently high value to make it worth pursuing a claim.

To determine the answer to these questions, it is vital that you seek legal advice from a professional negligence specialist and that you do this as soon as possible as there are strict time limits within which a professional negligence action must be instituted.

What is professional negligence?

Professional negligence occurs where a financial advisor has failed to exercise the skill and care expected of a reasonably competent financial professional, As a result, they have not performed their obligations towards you to the required professional standards.

Negligence may take the form of:

  • providing you with incorrect or unsuitable advice;
  • making an administrative error which has damaging or prejudicial consequences;
  • mis-selling or misrepresenting a product to you; or
  • failing to carry out your specific instructions.

How do I know if I can bring a compensation claim?

Provided you can show that professional negligence has occurred, it will usually be possible for you to bring a claim for compensation in any case where you can show that (because of the negligence) you have suffered a financial loss or some other type of financial damage. However, bringing a claim will only usually be advisable where the financial harm caused makes this worthwhile and where an apology, combined with some other form of voluntary redress, would not be more appropriate in the circumstances.

Sometimes, proving that financial loss or damage has occurred is easy. However, there are occasions where it can be more challenging, particularly in cases involving investments and pensions, where decisions will have often been taken according to your perceived attitude towards the risk that the value of investments can go up and down and where your investments will always be subject to the volatility of financial markets.

What are the most common types of financial negligence?

Financial advisors can be negligent for a range of reasons, but in our experience most claims tend to arise because an advisor has not understood what you want to achieve or because they have not taken proper account of your circumstances before recommending a course of action.

We also often see advisors who have been negligent because they have decided to deal with a matter that is outside of their area of expertise, or who have failed to take the time to explain the implications or consequences of going down a particular financial route or of adopting a certain financial strategy.

As professional negligence specialists, we are able to deal with any type of financial negligence claim, including (but not limited to) claims which arise because you have been advised to:

  • invest in an unsuitable financial product;
  • make an investment that is too high-risk for your risk appetite;
  • invest in a pension that does not meet your needs;
  • organise your tax affairs in an inappropriate way, perhaps resulting in HMRC alleging tax avoidance;
  • organise your personal or business finances in an unsuitable and highly prejudicial way; or
  • enter into an inappropriate mortgage or loan, including one that you cannot afford or one which involves unusual and onerous terms of which you were not fully aware.

Time limits for bringing a professional negligence claim

In most cases you will only have six years, from the date on which the negligent act you are complaining about occurred, in which to commence a professional negligence claim. However, there are situations in which a longer time limit may apply, including where it is not immediately apparent that negligence has happened or where the negligence only comes to light years later. It is therefore always worth checking with our solicitors whether or not a claim might be possible.

How we can help

We can check that you satisfy the criteria that needs to be met to bring a professional negligence claim and help you to gain access to useful evidence to support your case, including copies of any relevant notes and records held by your financial advisor which they may have so far been reluctant to share.

We can also ensure that you comply with the pre-action protocol for professional negligence, which requires both you and your advisor to take certain steps before a formal claim is made. The protocol is designed to encourage you to try to resolve matters amicably, without the need to go to court – for example, through lawyer-facilitated negotiation or a jointly sanctioned mediation. It is vital that the protocol is followed, as non-observance can result in you being financially punished.

Where your advisor refuses to engage in the protocol process, or where despite best efforts an out-of-court settlement cannot be achieved, we can then support you in preparing a formal claim and ensure that you receive first class representation when the matter comes to be decided by a judge.

Contact us

To find out more about making a professional negligence claim, please contact Rebecca Beynon-Phillips on 01733 882800 or email [email protected].

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