What redress is there if a financial adviser is wrong?

Published by Patrick Connolly on 28 September 2018.
Last updated on 28 September 2018

Q

If an independent financial adviser (IFA) gives incorrect advice, can you get compensation? I ask as I am wary of ‘experts’, having had a solicitor give incorrect advice that led to a significant bill. When the incorrect advice was challenged, the solicitor offered to do the work again for free, but I wasn’t financially compensated for the loss incurred as a result.

I am about to engage an IFA to help plan my retirement and I am worried about getting the wrong advice. I appreciate that an IFA may give advice in good faith and it later transpires there might have been a more profitable way to invest, but what happens if the advice you are given is incorrect?

From:
GM/Essex

A

Many people need to take financial advice. This is particularly the case for those with larger amounts of savings and investments, higher earners or those facing certain life events, such as having a child, getting divorced, inheriting money or retiring.

When making a personal recommendation, a financial adviser must obtain all of the necessary information about their client including their financial situation, objectives, knowledge and experience and the impact the advice will have on them. The recommendations they make must then be suitable for the individual, taking into account their circumstances, objectives and attitude to risk.

If you feel that you’ve been given unsuitable advice or have any other complaint against a financial advice firm, you should complain to the company in the first instance. They will assess whether the advice given was suitable for you at the time. If it wasn’t, they should determine if you have suffered any loss because of the advice and, if you have, pay compensation.

If the advice was suitable for your circumstances at the time, and all risks were fully explained, including any potential losses, then simply having lost money is unlikely to result in redress being paid.

When you complain to the financial adviser, they must acknowledge your complaint within five working days and issue a response in writing within eight weeks, telling you whether the complaint has been successful, or if they need more time to investigate.

Be sure to know how much an adviser charges and the level of service you can expect

If you aren’t happy with the firm’s response or don’t hear from them within eight weeks, you have the option to refer your complaint to the Financial Ombudsman Service (FOS). This is a free, independent service which will adjudicate on complaints between financial services firms and their customers.The FOS will assess all of the facts before deciding whether or not to uphold your complaint.

The findings from the FOS are binding on the financial services firm and if it is at fault it will have to compensate you. However, if you don’t accept the decision you still have the option to take your case to court.

There is a high level of protection for those who take regulated financial advice to ensure that the advice they receive is suitable. You should note that this level of protection doesn’t exist if you make your own financial decisions, even if you’ve received information or guidance from a financial company.

There are no guarantees when choosing a financial adviser, though you can improve your chances of finding the right one by focusing on a number of aspects. Firstly, choose an independent adviser, rather than one who is restricted to certain providers. Secondly, choose an adviser who is highly qualified, especially if you want specialist advice. Finally, ensure that you are aware of how much they charge and the level of service you can expect in return.

This article was written in response to a reader’s question. If you have a financial or work/career question that has left you scratching your head ask our panel of experts who will aim to shine some light on the matter.

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