Articles and legal news from the Atkinson Vinden Team.

Incorrect or Bad Financial Advice: What Are Your Rights


When about to make a big financial decision, people understandably seek the help of financial advisers. They have the specialised knowledge of all the relevant and current financial considerations, they have experience dealing with markets and are probably better placed than your stock-obsessed Uncle Sam to go to for financial advice. Or at least, that should be the case. However, if things go wrong and your financial future is put at risk, or seemingly completely destroyed, what happens?

Financial negligence

The law recognises that often professionals, such as financial advisors, can provide a poor, negligent service either for personal gain or out of sheer incompetence. It’s important to recognise that just because a financial advisor was involved in a financial decision that went pear-shaped, doesn’t automatically mean you will have a claim for financial negligence.

By the same token, it is not always correct to ignore a disappointing financial outcome and put it down to your own mistakes or inexperience, particularly if it was the financial advisor who pushed you to make that decision.

First steps

If you think you’ve received incorrect or bad financial advice, your first step should be to make a formal complaint to your financial adviser/firm.

If you remain dissatisfied with how they have handled your case, then you have one of two choices:

  1. Take your complaint to the Financial Ombudsman Service (FOS). A more cost-effective process in general but, be aware, there is a $280,000 maximum on compensation.
  2. Seek legal advice from a lawyer. Lawyers can help identify all of the losses for you so as to maximize your claim. They will generally try to negotiate a settlement for you as the first option, and there is a good chance of settlement if the negligence is obvious. It is usually the larger claims that go to court, because there is more at stake, and the legal costs are justified given the significantly better outcome if successful.

Taking your claim to court

If you want to be successful in your financial negligence claim, it will be necessary for the Court to see evidence that:

  1. Your financial advisor owed you a duty of care which was to exercise reasonable care and skill;
  2. They failed to comply with an accepted level of practice and acted negligently; and
  3. As a result of their negligence, you suffered a loss (usually financial).

Time limits may apply so it’s important to act quickly and speak to a lawyer as soon as possible if you decide you want to take your claim to court.

How to avoid negligence claims if you’re a financial services business

If you run a financial services business and want to avoid negligence claims, it’s imperative to have the necessary structures and policies in place to guide your professional employees. Verify information before sharing it with the client, avoid personal opinions and keep the advice strictly within the area of expertise, keep up-to-date records and case notes of client interactions – these are a few ways to mitigate risk if you’re working in a financial services business.

What does financial negligence look like?

It can sometimes be difficult to tell the difference between negligence and poor service. It is always advisable to seek legal advice for help in verifying if the service you received was negligent according to law.

The following are examples of financial advisor behaviour that may be the basis of a claim:

  • Pushing a financial product they do not know enough about.
  • Not providing financial advice catered to your situation.
  • Failing to make disclosures required by statute, including failing to provide a Financial Services Guide and a Product Disclosure Statement.
  • Recommending a financial strategy that is inappropriate for you and your situation.
  • Failing to assess your needs and tolerance for risk.
  • Failing to explain the interest payable on any margin loans you take out to make an investment.
  • Recommending an investment that offers them a personal gain, over one which doesn’t but is more appropriate for you.
  • Failing to review your financial plan at regular intervals or when necessary (if there is a dramatic change in the market, for example)

What happens if my claim is successful?

A Court will generally order compensation to return you to the financial position you were in before the financial advisor breached their duty of care. You will also usually receive an order covering a large percentage of your legal costs.

Before commencing any action, seeking legal advice from a professional negligence expert, such as the solicitors at AV Lawyers, is almost always worth your while.


Protecting your reputation starts with simplifying the complex. This handy checklist should quickly point you in the right direction and help you understand whether you have a case, and where to start to secure the best possible outocme.