Claims Against Financial Advisers

As true specialists in our field, we act for clients nationwide in claims against financial advisers, as well as in claims against other professionals.

Resolving claims against financial advisers

From the outset, we focus not on making professional negligence claims on behalf of our clients, but on resolving them. In this way, we ensure that ours is a broader perspective and a more open mind.

Moreover, and by harnessing:

  • Our wealth of experience acting in claims against a wide-range of professionals
  • Our unique insight into the defence of claims against financial advisers
  • Our commitment to providing a client-centric service as part of our core values
  • Our innovative and highly efficient service provision

we ensure that our clients achieve better results for substantial claims, time and again.

The financial advisers’ profession

While many view the world of financial services and investments as a mysterious one, there is often little choice but to engage with it. Whether a newcomer or seasoned investor, this can be a bewildering experience and considerable faith is usually placed in financial advisers to provide the information, advice and guidance much needed.

Sadly, that faith was shattered when, following the financial crash in 2007/8, widespread investigations laid bare both large scale institutional mis-selling and a raft of sub-standard investment advice. As a consequence, and unsurprisingly, the number of claims made against financial advisers and the financial services industry rose dramatically.

In more recent years, however, and following a range of regulatory changes, new incidents of financial mis-selling and mis-management appear to have declined and so too, the claims that they give rise to. But they have not disappeared altogether and nor, given the complexities and uncertainties inherent in many financial investments, are they likely to.

Common mistakes by financial advisers

Some of the common mistakes that can give rise to successful claims against financial advisers are:

  • Failing to correctly assess the risk profile of an investor
  • Selecting investment products or funds with excessive risk
  • Failing to warn of, or mis-representing, the risks associated with an investment product or fund
  • Promoting investments in unregulated collective investments schemes in the absence of a recognised exemption

Assessing the merits of a claim

While the fact that an investment has not performed as well as anticipated may provide grounds for a professional negligence claim, by itself it is not conclusive. Therefore, before embarking on a claim against a financial adviser, a careful assessment will need to be undertaken of a number of important issues, including:

  • The scope of the legal duties owed by the financial adviser
  • Any actions taken by the financial adviser to comply with those duties
  • The nature and extent of the loss caused by any breaches of those duties

This can be a complicated process and the merits of each claim will often depend on the background events that give rise to it. For this reason, caution should always be exercised when relying on the reported outcome of one claim, to assess the merits of another.

How to claim against a financial adviser

Depending on your personal circumstances and the extent of the loss you have suffered, you may be entitled to make a complaint to the Financial Ombudsman Service (FOS). The FOS can provide an efficient mechanism for resolving lower value complaints, particularly ones that are relatively straight forward. However, it is less suitable for larger and/or complicated matters and you will not usually be entitled to recover compensation for any legal costs that you incur as part of the complaints process.

Alternatively, and where the firm or financial adviser is insolvent and has been declared as being ‘in default’, you may be able to make a claim against the Financial Services Compensation Scheme (FSCS). While this is a statutory body, which is both independent and free to access, there are relatively modest limits placed on the amount of compensation that it can award.

Unfortunately, neither of the above options will be available to you if you have dealt with an unauthorised financial adviser or an unauthorised firm. An unauthorised financial adviser, also referred to as an unregulated financial adviser, is one that is not recorded on the Financial Services Register, which itself comprises a list of all those firms and individuals that have been approved by the Financial Conduct Authority (FCA) to undertake regulated financial activities. The FCA also publishes an Unauthorised Firms List. While not exhaustive, this contains an up-to-date list of all those unauthorised financial advisers that the FCA has previously identified.

Where recourse to either the FOS or FSCS is either not appropriate or not possible, many claims are commenced by correspondence and by following the procedures set out in the Pre-Action Protocol for Professional Negligence. While in some cases it may also be necessary to institute court proceedings, a considerable number of claims are resolved without the need to do so.

The advantages of instructing a solicitor

You are not obliged to instruct a solicitor to advise and represent you in a claim against a financial adviser, but it is usually sensible to do so. Professional negligence claims against financial advisers are often complicated and time consuming and a successful outcome can very much depend on the way in which a claim is prepared and pursued.

To help you decide between instructing a solicitor and pursuing a claim as a litigant in person, we identify and comment on some of the key factors to consider in our guide: Professional negligence claims – Do I need a solicitor?

If you do decide to instruct a solicitor, you would do well to instruct one who genuinely specialises in professional negligence claims. While an ever-increasing number of solicitors (and claims management companies) claim to undertake work in this niche area, in reality there are very few solicitors who are true specialists. To assist you in identifying the best solicitor to act in relation to your claim, we have highlighted seven key features to consider as part of your search in our guide: Professional negligence solicitors: How to find the best

Compensation for professional negligence

Where a financial adviser is found to be negligent financial compensation, usually in the form of ‘damages’, can be awarded for a wide range of losses. Using case examples, we identify and explain many of the different types of compensation awards available in our guide: Compensation for professional negligence: What can I recover?

As in other areas of litigation, the true value of any compensatory award is often dependent on the prospect of being able to successfully recover it. Fortunately, in claims against financial advisers, the defending party often carries professional indemnity insurance to meet all or part of any judgment or award made against it. This represents a significant benefit to claimants, as we explain further in our guide: Professional Indemnity Insurance – A Claimant’s Guide

Even if the financial adviser or firm at fault is no longer trading or has been dissolved, it may still be possible to make a claim and recover compensation. The support available to claimants in these circumstances is explained in our article: Claims against closed professional firms and practices

Time limits for claims against financial advisers

There are a number of important reasons for acting promptly when a mistake has been made or discovered. One of these are the time limits that apply to all professional negligence claims.

These time limits can be found in the Limitation Act 1980. In short, they require legal proceedings to be commenced within:

  • 6 years of the date upon which damage or financial loss occurs – section 2
  • 6 years of the date upon which the mistake occurred – section 5
  • 3 years of the earliest date upon which the claimant has both the knowledge required for bringing a claim and the right to bring a claim – section 14A
  • 15 years of the date on which the mistake occurred, even if the time limit prescribed by section 14A has not expired – section 14B

Therefore, where there are grounds for pursuing a claim for financial adviser negligence, a claimant will generally have 6 years from the date of wrongdoing or loss, but may have 3 years from the date of discovery, if later, in which to bring any claim, subject to a long stop of 15 years.

However, while these time limits may appear straightforward in summary form, applying them in practice can be much more challenging. Unfortunately, there are a multitude of cases in which they have been misapplied, not only by lay clients acting as litigants in person but also by solicitors and other lawyers who have themselves fallen into error.

Although limitation is a complicated area of law with a large body of case law relating to it, further information about it can be found in our introductory guide: Time limits for professional negligence claims – FAQs

Funding claims against financial advisers

Before embarking on any professional negligence claim it is imperative to consider how it will be funded. In comparison to other more routine forms of litigation, professional negligence claims can be more complicated, more time-consuming and more costly to resolve.

Fortunately, there are a number of ways to fund litigation. Each has its own advantages and disadvantages and can be more or less suitable, depending on individual circumstances. Further information about these different funding options can be found in our related guide: Fund a claim

Specialist legal advice

If you are contemplating making, or even currently pursuing, a professional negligence claim against a financial adviser and would like to arrange an initial consultation with us, free of charge or commitment, please do not hesitate to contact us on 0800 195 4983 or by email at mail@pnclegal.com.

We have experience of resolving claims against a wide range of professionals.

Using the links below you can learn more about specific professions and some of the common mistakes that give rise to negligence claims against them.