Financial Planning

Are you Entitled to a Financial Planning Compensation Claim?

Financial planning involves developing personalised strategies to help you best manage your finances and achieve your financial goals. It is common practice to engage the services of a financial adviser, who are qualified professionals that are able to prepare financial plans suited to your individual needs and circumstances. While financial advisers are legally required to act in the best interests of their clients, this regrettably does not always occur in practice. As a result, Australian laws have been amended to reflect the importance of upholding the integrity of the financial services sector by giving quality financial advice. These laws seek to protect victims of negligent financial advice as they can often suffer devastating financial losses.

What is a financial planning compensation claim?

A financial planning compensation claim is a means for those who have suffered a loss as a result of wrong, misleading or negligent financial planning advice to claim back their lost money.

What are the obligations of Financial Planners?

In compliance with the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001, legal obligations of financial advisers include:

  • Financial advisers must not engage in unconscionable conduct
  • Financial advisers must not engage in conduct that is misleading or deceptive, or likely to mislead or deceive
  • Financial advisers must have a reasonable basis for the advice they give you
  • Financial advisers must provide their services with due care and skill
  • Financial advisers must provide their services efficiently, fairly and honestly
  • Financial advisers must provide you with a variety of documents such as an up-to-date Financial Services Guides and Statement of Advice

Examples of negligence

Some examples of negligence from financial advisers may include:

  • Failure to obtain sufficient information about your relevant personal circumstances, financial situation, financial objectives, financial needs and risk tolerance
  • Recommending financial products that, after consideration of your personal circumstances, are risky or unsuitable
  • Recommending financial products for which they receive commission for, despite it being too risky or unsuitable for your circumstances
  • Recommending a substantial investment in one product, rather than a balanced and diversified strategy
  • Failure to advise you on all the risks associated with a strategy
  • Failure to advise you on alternative investment strategies
  • Failure to consider how a strategy may impact your retirement, particularly for older investors

claim

Am I eligible to make a claim?

If you have suffered a loss as a result of wrong, misleading or negligent financial planning advice, then you may be eligible to make a financial planning compensation claim. An occurrence of any of the above examples may be reasonable grounds to make a claim.

Generally, a financial adviser will owe you a duty of care if you rely on their advice and it is reasonably foreseeable that you will suffer loss if the financial adviser fails to exercise reasonable care and skill when providing the advice. If your financial adviser has breached this duty of care, and you have suffered a loss as a result of that breach, this may be considered as negligence.

However, it is important to note that financial advisers are not responsible for every bad investment outcome. Some investments may go down in value simply as the result of market fluctuations, for which financial advisers cannot be held accountable for.

If you believe you are eligible for a financial planning compensation claim, it is best to speak to your lawyer about whether your negligence claims are viable.

Are there time limits in making a claim?

Yes, there is a statute of limitations on financial planning compensation claims. This means that you have a 6 year time limit, beginning from when you first suffered your loss, to bring forward a claim. To ensure you are have not lost the opportunity to take legal action and receive compensation, you should seek legal advice as soon as possible.

If my claim is successful, how much compensation will I receive?

If you are successful in your claim, you will be compensated to the point which will return you to your financial position before the negligent actions of your financial adviser occurred. This may also include any lost profits, or expenses incurred trying to resolve the negligence.

For claims less that $150,000, it may be possible to resolve your dispute via the Financial Ombudsman Service (FOS). For claims greater than this amount it may be best to take legal action. As the calculations of compensation may be difficult to assess, and requires expert estimation, legal advice should be sought to determine which avenue to take.

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