People who seek advice from a professional such as an accountant, lawyer or financial planner have a right to assume they will receive a certain level of care and expertise, and have their affairs managed properly.
While the overwhelming majority of professionals provide good advice their clients, some people fall through the cracks and too often we see the consequences of bad advice.
People who have had their retirement dreams shattered as a result of bad financial advice, or have been induced by their solicitor to engage in risky loans and lending practices can lose their financial security, livelihood and even their homes as a result of poor professional advice.
Professional advisers owe legal duties to their clients to ensure that the advice that they provide is appropriate. Usually, there are three general legal principles that govern the relationship between a professional and advisor:
- Contract –The contract between a client and their advisor can have express terms on how the relationship will proceed. In addition, a Court will often impose implied terms into a contract, for example an implied term that a professional should provide advice with reasonable care and skill.
- Negligence – The law imposes a duty of care on professionals to provide advice to their clients at a reasonably competent standard. If the advice falls below this standard, measured against the advice that would have been provided by an ordinarily skilled advisor, the professional may be liable to the client for any losses.
- Statute – Legislation also imposes a number of duties on professionals. Some of those duties overlap with pre-existing duties in contract in negligence, while others are unique. In addition, where an accountant preforms specialist roles such as that of an auditor, their role is governed by further extensive regulation.
We often see situations where a current advisor is the first person to pick up that a client has received bad advice. For example, an accountant may be alerted to irregularities before the client is aware when preparing an annual tax return.
Professionals who are concerned about previous advice received by their client should be careful not to provide financial advice or legal advice themselves but should instead recommend that their client seek a second opinion. If the client has already suffered financial loss as a result of the advice, a prudent professional will suggest the client seek legal advice.
Some people do not realise that they may have legal remedies available to them to recover compensation. They chalk up their losses to bad luck, feel embarrassed or believe that they are somehow personally responsible for the losses they have sustained. This is not always the case. Discussing the reasons for previous losses can be a difficult conversation to have with a client, but in the long run, it can be rewarding.