Financial negligence, also called financial advisor negligence occurs when a financial advisor provides poor, or inappropriate financial advice that leads to a client suffering financial or asset loss due to miss-sold mortgages, equity release, or unsuitable investments.
This negligence, whether inadvertent or deliberate is often a consequence of an investment banker, independent financial advisor, stockbroker, insurance broker, or insurance company.
In order to evaluate whether your loss is a result of financial negligence it is best to consult with a lawyer experienced in financial negligence claims.
Recouping Losses from Bad Financial Advice
When a person puts their faith and money into a professional financial advisor, the expectation is that the financial advisor will handle your finances with a level of duty and decorum respective of their occupation. While no one can guarantee financial gain, what your financial advisor can do is provide a level of knowledge in the industry to provide the best financial options, as well as alert you to the risks of poor financial choices.
It is often the case that your finances will fluctuate as both profit and loss over time due to market fluctuations and unexpected or unforeseen events. However, neglect and inappropriate financial advice, below the standard required by law, can lead to significant financial loss for a client. This is especially disheartening when that loss affects life-long savings such as retirement or superannuation funds.
Successful results from a financial negligence claim can result in recouping your losses, as well as money spent, or lost while trying to resolve the debt incurred due to your loss.
When your lifestyle or retirement is lost due to poor financial advice you may have the ability to file a financial negligence claim for compensation loss from your financial advisor.
This is when a financial negligence lawyer should be sought out to assist you in recouping your losses.
What are the requirements for a financial negligence claim?
As a financial advisor is working in a speculative profession where a degree of financial loss is a possibility, and those entering into an agreement with a financial advisor understand this, financial negligence can be difficult to prove. However, gross failure on behalf of a financial advisor can be assumed under certain criteria that your legal team will need to prove. In order to file and win a financial negligence claim you must prove:
- Duty of care was owed to you. That is, the financial advisor has a legal obligation to adhere to standard reasonable care while managing your funds.
- Your financial advisor’s advice or actions were outside the typical advice given by similar advisors. For example, your advisor allocated funds, or advised you on a high risk-reward investment other advisors would warn against, while also not properly notifying you of the risk.
- Your financial advisor’s action directly caused you to suffer financial loss.
If you and your legal team can prove these three points, then you may be successful in recouping money from a financial negligence claim.
Do I have a financial advisor negligence claim?
The ability to show your financial advisor used poor judgement, advice, or negligence in managing your money and assets will be important in recouping losses. If you believe your financial advisor gave you incorrect, misleading, or poor financial advice resulting in financial loss you can seek the help of a legal team to recoup your losses.
While loss in investment has some expectation, there are several reasons you may make a claim, such as:
- A risk strategy inappropriate for your financial circumstances, or failure to implement your plan appropriately.
- Failure of the financial advisor to perform an adequate assessment of your circumstances, needs, and financial goals, or assess your personal risk-tolerance.
- Failure of your advisor to warn you of risks associated with your investment strategy, or individual investments.
- Your financial advisor moves forward with a plan without fully explaining the risks of the plan, or without verifying that you understand the risks of the financial plan.
- Failure of your advisor to analyse your investment to determine your financial consequences when the market falls, as well as the failure to notify you of this analysis.
- Your financial advisor is negligent in monitoring your investments and responding to economic changes that affect your funds.
- Failure of your advisor to regularly evaluate, discuss with you, and revise your financial strategy.
- Your advisor has not notified you of payable interest on loans acquired to make an investment. Or, you were advised to take loans on investment, despite you not being able to afford the loan.
- Lack of diversification among risk levels to protect your investment, commonly referred to as, “Putting all your eggs in one basket.”
- Your advisor recommended investments which pay high commission to the advisor while other investments were more appropriate to your financial circumstance.
- You have been advised to invest in agricultural business investments for the up-front tax deduction while being at high-risk of receiving return on investment. As a result, you incur high financial loss.
- You were advised to invest in company shares or managed funds which had underlying flaws, or had no value.
What financial information should I provide to my adviser?
In order to successfully move forward with your financial negligence claim and your legal team it is important that your legal team understand all of the circumstances of your claim, as well as losses incurred. BY understanding your satiation your legal team can advise you on a game plan going forward, as well as potential of recouping your losses. While not a comprehensive list, some of the information you will need to provide:
- Your understanding of the risks associated with your financial advisor’s advice and actions.
- Tolerance of financial risks involved in advised investments.
- Current investment portfolio.
- Tax position
- Expected retirement age, and retirement entitlements
- Current financial incomes unrelated to investment loss such as employment, inheritance, trust, other income.
- Established need for regular income, financial growth, and ability to access, or “cash-in” on investments.
- Family commitments such as dependants and elder care guardianship.
- Ability to service loans taken for investment.
Receiving inappropriate, poor, or misleading advice from a financial advisor, or having your funds poorly managed can have significant consequences to your personal wealth and retirement. Choosing to tackle the financial advisor and their insurer on your own, and without legal representation will have you on an uphill battle that involves time, patience, an understanding of the laws, contracts, and how the courts will review the process. Each step of your claim, how it is conducted, and understanding the fine-print is essential.
Once you feel you have received poor financial advice resulting in loss, you should file a formal complaint with the financial advisor and their company. If the advisor, or their company does not adequately respond to your complaint you have the right to appeal to the courts, or an Ombudsmen scheme. An Ombudsmen scheme is used to resolve complaints made by a citizen or consumer against a public body or corporation.
A legal team in your corner can take the additional stress filing a claim on your own will cost. They can explain your legal rights, and help you determine if you have the ability to take legal action based on your circumstances and financial loss. Your losses, how they came to be, and the time-limit to file a financial negligence claim will determine your ability to recover losses. Most states in Australia have time-limits from the time you receive your loss to when you file a claim of 3-6 years. Most claims are resolved within two years of working with a legal team.