Many people seek the assistance of a financial planner to help them best manage their finances and achieve their financial goals. Unfortunately, sometimes they are lead astray by financial advisors who have given them wrong, misleading or negligent financial planning advice. As more news continues to surface about the occurrence of financial negligence, Australian laws have been amended to reflect the importance of giving quality financial advice. These laws seek to protect victims of negligent financial advice as they can often suffer devastating financial losses.
As such, there are financial negligence claims available to compensate these victims for their losses. If you believe you have received negligent financial advice, read on to find out more about making a claim against a financial advisor and what is involved in making such a claim.
What is a financial negligence claim?
A financial negligence claim (also known as a financial planning compensation claim) is a means for those who have suffered a loss as a result of wrong, misleading or negligent financial advice to receive compensation for their losses. This claim is usually made against a financial advisor or their employer.
What are some examples of financial negligence?
Example of financial negligence from a financial advisor may include the following:
- 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
It is important to note that financial advisors are not responsible for every bad investment outcome. Some investments may go up or down in value simply as the result of market fluctuations, rather than negligent financial advice, and financial advisors cannot be held accountable for such fluctuations.
What is required for a financial negligence 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 negligence claim.
To make a financial negligence claim, the following criteria must be met:
- The financial advisor owed you a duty of care
Generally, a financial advisor will owe you a duty of care if you rely on their advice and it is reasonably foreseeable that you will suffer a loss if the financial advisor fails to exercise reasonable care and skill when providing you with advice.
- The financial advisor breached their duty of care
An occurrence of any of the above examples may be reasonable grounds to make a claim.
- You suffered a loss
Victims of negligent financial advice will usually suffer a financial loss.
- This loss was a result of the breach of duty of care
If the financial advisor had not given your negligence financial advice, you would not have suffered any loss.
If my financial negligence claim is successful, how much compensation will I receive?
If you are successful in your financial negligence claim, you will be compensated to the point which will return you to your financial position before the financial negligence occurred. You may also be compensated for any lost profits or expenses incurred in trying to resolve the negligence.
For claims less than $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.
Are there time limits in making a financial negligence claim?
Yes, there is a statute of limitations on financial negligence claims. There is generally a 6 year time limit to bring forth a claim, beginning from when you first suffered your loss. While the time limits for making a claim against a financial advisor can be extended, an extension is only granted in exceptional circumstances and should not be relied upon. To ensure you are have not lost the opportunity to make a claim and receive compensation, you should seek legal advice as soon as possible.
For more information about financial negligence claims, get in touch with Schreuder Partners today.