Receiving bad financial advice can have a devastating impact on your savings and retirement plans.
As we plan for the future, it’s becoming increasingly common for people to seek advice from a financial advisor. The advice of a competent financial advisor can be invaluable when reaching important financial milestones such as planning for retirement or seeking advice about what to do after selling a business.
Most financial planners provide sound advice to their clients. That advice can make a substantial difference to people’s financial health and stability. The financial planning industry itself is also striving towards a higher degree of professionalism.
The industry should be praised for those efforts.
Despite this, some clients of financial advisors still fall through the cracks and receive bad financial advice. When this occurs, it is important for both financial planners and their clients to know their legal rights and responsibilities.
People who seek advice from a financial advisor have a right to assume they will receive a certain level of care and expertise. Their financial affairs should be properly managed. Financial advisors are legally obliged to ensure that they obtain sufficient information about the client’s financial needs and objectives, understand the financial products they are offering and act in the scope of their expertise. In many cases, financial advisors are also required to provide their clients with a written record of their advice, providing reasons for their investment recommendations.
When a financial advisor’s work falls below the minimum standard, there can be serious problems. Bad financial advice can lead to significant financial losses. Retirement funds can be put at risk. The lifestyle that people envisaged for their retirement and worked very hard for can be lost.
If an advisor provides bad financial advice that falls below the minimum standard, their clients may be entitled to compensation through the courts.
In my experience, many 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. With that said, losses caused by market fluctuations are not usually sufficient to make a claim. The legal test relates to the appropriateness of the advice provided, when compared to an individual’s personal circumstances, viewed against a reasonably competent professional standard.
If you are concerned about the advice that you have received from a financial advisor, you should consider obtaining independent legal advice on the avenues for compensation that may be open to you.