For many people, there is a perceived power imbalance when dealing with their financial affairs – in particular, when obtaining advice from financial planners or advisors.
This is in part because financial professionals seem to have access to resources, information and industry news that the average layperson cannot reach, or possibly even interpret. As a consequence, many people feel that they have been exposed to the consequences of poor advice, or possibly lost money as a direct result of the negligence of financial advisors.
It may be tempting for people who have fallen victim to poor or incorrect advice to decide to cut their losses rather than pursue restitution or compensation. However, this is not necessarily the best strategy, especially in the current legal and regulatory environment.
Banking Royal Commission uncovers a range of misconduct
The recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which started in 2017, has substantially changed the face of the sector. In particular, it has exposed some of the poor behaviours engaged in by many members of those industries.
Part of the focus of the Royal Commission related to inappropriate, incorrect or blatantly negligent financial advice. Some examples include professional advisors failing to provide complete or accurate information or advice to their client, resulting in incorrect or disadvantageous financial decisions being made.
Other types of negligence include failing to take into account all relevant factors which could be relevant to a client’s financial decisions, failing to disclose relevant commissions or financial interests in recommended products, or not providing enough information about hidden fees, charges or other costs or consequences.
The potential consequences of such advice
The consequences of receiving such negligent advice can result in a client paying too much for a product, failing to be aware of all potential products that may be relevant in their circumstances, not taking actions within timeframes required by the Australian Taxation Office to avoid financial loss, or directly losing money to inappropriate or unsuitable products.
Potential avenues for redress
Inappropriate financial advice or related misconduct is generally governed by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
Both entities have substantially increased powers in the wake of the Royal Commission, and are focused more than ever on maintaining consumer protections and diminishing consumer harm.
Those who believe that they have received negligent financial advice may also take recourse through the Australian Financial Complaints Authority (AFCA), a body set up exclusively to hear complaints relating to potential financial misconduct.
Very serious misconduct, or substantial financial loss for consumers, can also be litigated through the formal court processes. This includes by taking action relating to negligence, breach of contract, breaches of consumer protection or trade practices law.
Pentana Stanton can help in cases arising from poor or negligent financial advice. We can advise on methods by which you may be able to pursue compensation or restitution. We can even assist you with the litigation process if that is the recommended strategy. Book your one-on-one appointment today for detailed guidance on your particular situation.