Independent Financial Adviser - If Things Go Wrong

If Things Go Wrong

Financial services are heavily regulated in the United Kingdom. While this may in some cases restrict the market and places a heavy burden on financial services professionals, it also makes for one of the safest consumer markets in the world.

If a client buys a financial product on the advice of an IFA which turns out to be unsuitable, they have the right to complain and, if the complaint is upheld, may receive compensation. All regulated financial services companies, including IFAs must have effective internal complaint handling procedures. If a complaint is not dealt with satisfactorily internally, the client has the option of going to the Financial Ombudsman Service, which will conduct an independent investigation and has the power to award compensation if warranted. In a large majority of cases referred to the Ombudsman, it finds that the firm had treated the customer’s complaint fairly.

This does not mean that a client can claim compensation simply because an investment loses money. With all investments, there is an element of risk, the basis for complaint would only be whether or not that level of risk was unsuitable for a particular client based on the information given to the adviser. This is particularly important (and not well-understood in the public consciousness), and especially in relation to the sale of with profits endowments intended to be used to repay an interest only mortgage. A great many people saw strongly reduced investment returns from their endowments due to lower interest rates (and hence investment returns) and subsequently claimed that they had been mis-sold. While the poor performance is regrettable, it in no way constitutes mis-selling in the legal sense unless it can be shown that the endowment was unsuitable for the client's needs at the time it was advised. It is not possible to use retrospective judgements to assess decisions made in good faith in the past either.