Posted by Nicola Radcliffe, Senior Associate
Beware the risks of not taking independent financial advice
Cutting out the cost of seeking independent financial advice and making your own choices can save on fees, but can also leave you unprotected in the event that your investments go wrong.
As investors become increasingly aware of their choices the investment market is booming with new and innovative ways to promote funds which allow investments to be made directly. However, with the Financial Services Authority and its regulatory side kick the Financial Conduct Authority both clamping down on “non-advisory” services, what protection is offered to the consumer?
The role of the adviser
Traditionally, consumers looking to make an investment would seek the advice of a financial adviser who, based on their client’s wishes and attitude to risk, would decide on what and how much to invest and manage those investments on their client’s behalf as they saw fit. If recommendations turned sour there would be a right of redress if the customer ought to have been better protected from risks that the adviser failed to highlight or if the investments chosen by the adviser were unsuitable.
To limit their exposure to these claims many financial advisers have shied away from offering any actual advice and have limited their services to “execution only”, simply crossing the i’s and dotting the t’s on the investments once the client had made up their own mind on whether that investment met with their needs.
Making your own choices
Nowadays, individuals are much more aware of their choices and the investment market has responded to the doors this has opened for them. The market is booming with platforms offering new and exciting ways for investors to bypass the middle man and make purchases or invest in funds directly. It is estimated that £116 billion has already been pumped into the investment market through these D-2-C (direct to customer) platforms.
Many firms advertise lists of “going up” funds or publish the investments that have been made by so called “savvy” investors allowing consumers to copy their choices.
Whilst this sounds like the stuff of Wall Street, understandable only by experienced brokers and knowledgeable investors, they are often aimed at individuals who no longer want to incur the additional costs of seeking independent financial advice.
These B-2-C platforms brand themselves as offering execution only services with a view to protecting themselves from claims brought by out of pocket investors. However, is it possible that these lists and adverts constitute a “recommendation” or “advice” giving rise to a duty of care to the investor?
Do you have a claim?
Until it is better understood where the line is drawn, individuals making direct investment choices should bear in mind that they are less likely to have a right of redress or someone else to blame if their self-chosen investments go wrong. If you have sought independent financial advice and have subsequently suffered financial losses as a result of the investment choices made on your behalf you may have a claim in professional negligence. Contact us today and speak to a member of our team.
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