Advisers should ensure they discuss a lower risk alternative investment product alongside the investment strategy they ultimately recommend in order to mitigate the chance of future legal claims, a lawyer has warned.
Speaking at the IFP Conference at the Celtic Manor in Wales today, Clarke Willmott associate Philippa Hann said the majority of cases she sees concern the allegation that the adviser puts the client into an investment which exceeded their risk tolerance without offering an alternative.
She said: “Almost all cases I see involve a client saying they didn’t want to take on the amount of risk that they did. The best way to prepare for that is to discuss a lower risk product. Keep a record of that discussion because if you have a record of your work with them then it is easy to say you looked at a lower risk product.”
Hann added that advisers typically fail to keep adequate records of their work with clients. In the event there is no written record of the advice given to clients, it is likely the adviser will lose the case, she warned.
She added: “Often when I see a file there are no attendant notes. If you’re relying on witness evidence alone without a written record then you have already lost.”
Advisers should also be wary of introducing potential liability for investment loss by advising clients with whom they do not have an agreement to provide advice, added Hann.
The FCA’s Bob Ferguson recently warned the regulator would be looking at the blurring of the line between advice and execution-only.