Financial Advice Open Ended Liability Review

Financial Advice Open Ended Liability Review.

A fact that is not commonly known is that financial advice that you receive is an open ended liability for the financial adviser.

In all other industries, you have a period in which to claim for faulty goods or workmanship or negligence.  This is not the case for financial advice, where the liability is open ended there is no such thing as a “long stop”.

What this means is that advice that you received 10, 20 or 30 years, if proved to be negligent, you are entitled to redress and compensation if a financial loss through negligence can be proved.

This is why financial advice can be so expensive and why some financial advisers will not even consider taking you on as a client.

The Financial Conduct Authority (FCA), the industry regulator, has finally confirmed after intense lobbying that it is to reconsider this position.

Comment

Many financial advisers are leaving the industry, many advisers and banks have already moved to ‘non-advised’ services where consumers have no protection and receive no advice.

This is detrimental to both the consumer who cannot access advice where as a result make the wrong decision with their pensions or investments and also the financial services industry.

Financial advice used to have a 15 year time limit in which a consumer could make a claim if there was negligence, this was removed by the Financial Services and Markets Act.

Many financial advisers also  struggle to secure professional indemnity insurance as a result of there being no “long stop” on claims and with the growth in the claims industry, more and more face claims, some legitimate and some not. 

Many financial advisers are not able to advise in certain sectors because they are not insured to advise in certain areas, again meaning consumers may lose out.

The Financial Ombudsman Service is also creaking with thousands of new claims disputes arriving every day.

We suggest 15 years is long enough for any person to work out whether they have been mis-sold or not if they review their finances regularly and we welcome the review by the FCA.  A ‘long stop’ will encourage more advisers into the industry and provide greater access to advice.  This cannot be a bad thing.