The news that the High Court has granted a couple’s claim against their adviser for outstanding losses, despite having been awarded compensation through the FOS, has caused both confusion and anxiety in the industry.
Many advisers feel that once the FOS has ruled, then no further action should be possible, but given that Barry and Julie Clark’s losses far exceeded the maximum amount able to be awarded in compensation by the FOS, why should they not have the opportunity to get full redress for the bad advice they received?
We have been shouting from the rooftops about improving fairness and transparency for some years; if we want to be seen as an honourable and professional industry, we have to prove that we stand by our advice, or suffer the consequences.
At the end of the day, this is a wake-up call for all advisers to triple check that the advice they give is entirely correct and appropriate for the client.
If our clients lose money and it is our fault, we should be held to account not only by the FOS, but by the courts as well.
Whilst many advisers have been complaining about the High Court judgement, the moral of the tale is that the onus is on advisers to ensure they are giving copper-bottomed advice at all times, properly researched and extensively documented.
Without wishing to cast aspersions on the advisers in this case, the investors allegedly lost £500,000 from money which was invested as a result of selling their business. My immediate thought is that this should have sounded alarm bells for any adviser. surely the money should have been conservatively invested to protect the couple’s capital which had been built up over their working lives?
The advice to invest this money in geared TEPS looks questionable to say the least, even without looking at the commission earned, which is likely to have been around £25,000. Such cases do nothing but tarnish the reputation of all advisers, so I hope this will be a warning shot across the bows of advisers who think they can sail close to the wind and get away with it.
The current claims culture and recent misselling scandals muddy the waters in this debate. Clearly as an industry we will always be on the back foot, thinking defensively about whether or not what is being marketed by providers as “normal” today could be seen as bad advice tomorrow.
However, we have the tools and framework to get it right. Clear-cut processes, efficient research resources, proper records and good sign-off procedures can support decisions about suitability and fee-based charging structures should protect the client from inappropriate product recommendations.
I would like to think that the Clarks’ case is an isolated one and unlikely to be repeated in the post-RDR world but, realistically, bad advice does still happen, and clients need to be confident that they have proper protection, through the courts if necessary, should they be unfortunate enough to fall foul of it.
Carl Lamb is managing director of Almary Green