Financial Mis-Selling Claims - Mortgages, Pensions and More
What is financial mis-selling?
Most of us have heard of PPI and the mis-selling scandal which caused tens of thousands of financial services customers to seek compensation. Now, experts believe that pension and mortgage mis-selling will be the next major problem to hit the financial services sector. To find out if you are eligible to make a financial mis-selling claim, contact lawyers today on 0800 0891 331 or complete our claim now form by clicking here.
The Financial Conduct Authority (FCA) is an independent public body which regulates financial advisers. Reviews of the industry by the FCA have found historic mis-selling in relation to a wide range of financial products but most notably in relation to mortgages and pensions.
The consequences of negligent financial advice can have devastating effects for an individual and their family. Thompsons Solicitors are now fighting for clients who have suffered financial loss as a result of negligent advice.
How do you know if you've been mis-sold a financial product?
Below are some basic examples of how mis-selling and negligent advice can result in financial loss.
Do any of these scenarios apply to your situation?
Pensions
Pensions mis-selling is nothing new. The trend of mis-selling actually began with Pensions back in the mid-1990’s and, since then, we have seen mis-selling extend to a whole range of other financial products. However, things seem to have travelled full circle as it is widely believed that the next trend on the horizon for mis-selling litigation relates to self-invested pension plans also known as SIPPs. While there is currently very little in the way of authority from the courts on this area, there are a number of on-going High Court actions in England which we hope will provide clarification and guidance for those who have suffered as a result of unsuitable advice in relation to SIPPs.
So what are some examples of bad advice which fall under the umbrella of Pensions mis-selling?
The most common example is when an individual is advised to transfer their pension pot from their stable, secure occupational pension to a self-invested personal pension. In many cases it is never explained to the individual that this switch means that they will lose certain reserved rights or benefits which are guaranteed under their occupation pension scheme. In addition, financial advisors often fail to properly assess the individual’s attitude to risk at the time of transfer resulting in the individual’s life savings being invested in far riskier ways than they are comfortable with.
It is important to remember that the fact that you were advised to take out a SIPP, in and of itself, does not mean that you have a claim or that you are entitled to compensation. What matters is the nature of the advice that was given and what actually caused the loss i.e. was it a result of the poor advice or simply due to some other, unavoidable factor.
Another common example is where an individual is advised to purchase an annuity rather than an income drawn down pension. An annuity is a low-risk guaranteed source of monthly income and may well be an appropriate product in certain circumstances, however, financial advisors regularly fail to fully assess the specific needs of an individual and recommend annuities despite the fact that someone may require ready access to their funds at short notice.
Not all Pension claims relate to transfers.
Financial advisors often use their “expertise” to adopt an investment strategy, and invest pension funds, which is completely at odds with an individual’s attitude to risk. Financial advisors have a duty to properly assess an individual’s attitude to risk and act accordingly. You may have a claim if you have lost money as a result of a poor investment which was completely at odds with your portfolio’s agreed risk category.
Pensions are a complex financial product and the merits of every single claim will depend entirely on the specific facts and nature of the advice given.
When considering the prospects of success, there are many issues to consider ranging from the question of limitation (is your case out of time) to what loss, if any, has actually occurred as a result of bad advice.
Pension mis-selling examples
Switching from an occupational pension to a personal pension example
Mick has worked for the same company for 35 years and has an attractive occupational final salary pension worth in the region of £75,000. Mick has no investment experience but is keen to find out how he can maximise his future income and therefore seeks advice from an independent financial adviser. Following his adviser's recommendation, Mick agrees to transfer his pension pot to a SIPP (self-invested personal pension). He is told that this move is a "no-brainer" as it will offer him greater flexibility and control over his investment which will, in turn, lead to a greater return. The financial adviser fails to explain that Mick will lose all of the safeguarded benefits and guarantees under his occupational pension scheme such as his life cover and private health insurance. In addition, Mick is not told of the hefty charge he has to pay in order to transfer his pot.
Over the next few years, on the recommendation of his adviser, Mick authorises a serious of risky investments which greatly reduce the value of his pension pot. When Mick challenges his adviser's performance, he is told that the markets are unpredictable and no investment is ever guaranteed to be successful.
Annuity vs income drawdown pension example
Mick works alongside his best friend Keith who has a similar final salary pension worth £75,000. Keith consults the same financial adviser and explains that he intends to buy a bar in Tenerife once he retires. Keith is advised to purchase an annuity as this is a low-risk option which will guarantee him the certainty of a monthly income following retirement. Unfortunately, the adviser does not explain that Keith will be unable to withdraw any of his pension pot once he has purchased his annuity – he will only receive funds by way of a monthly income. Keith only realises his predicament when he moves abroad and wishes to withdraw a lump sum to purchase the property for his bar in Tenerife.
The adviser failed to fully consider Keith's circumstances and recommend a suitable product. He should have recommended an income drawdown pension which would have allowed Keith much more flexibility with his pension pot. This product would have allowed Keith to withdraw a lump sum, with no penalties or fees, if and when required.
Churning
Many investors are fairly knowledgeable and like to be involved with the management of their investments, but others simply place their trust in the experts.
The scenario below is an example of "churning" which is a widespread practice where advisers regularly switch a client's money from one product to another for the sole purpose of generating commission. These high frequency costs hit the client regardless of whether they make a gain or loss from the switch.
Churning example
For years Paul has used the same financial adviser who manages his portfolio and dictates the investment strategy. Every few months his advisor switches his shares and bonds from one product to another and Paul is charged a "management fee" on each occasion. Paul is charged this fee irrespective of whether the switches make him any money. Following an in-depth review of his portfolio, Paul considers the switches to be excessive. In addition, he cannot see any obvious benefit from the activity and, in most cases, the funds appear to have simply been transferred between almost identical products.
Paul is unsatisfied with his adviser's performance and feels that the significant fees are unjustified given that he has not benefitted from the investments. The adviser is unable to provide a satisfactory explanation.
The product itself is not the only important factor to consider
Mis-selling and negligent financial advice can occur in relation to any investment product whether it is a mortgage, pension, shares, bonds, ISAs, annuities or trusts.
Each case is fact specific and the prospects of success will largely depend on whether the advice given at the time was considered appropriate in light of the individual's circumstances and their knowledge of the product and associated risks.
How do financial mis-selling claims work?
Essentially we follow a very simple three step process:
- If the company who gave you the advice is still trading then a formal complaint must be made, in writing, directly to that company in the first instance.
- If your complaint is rejected, or you do not receive a response, then a written complaint must be lodged with the Financial Ombudsman Service (FOS). The FOS have authority to award compensation up to £100,000 (please note it can take up to 6-9 months for FOS to carry out their investigations and issue a decision).
- If you are not happy with the response from the FOS then you can raise court proceedings and progress your claim by way of an action for damages.
How do I get started?
Thompsons Solicitors has a long-established reputation of fighting for justice. We can help you with each stage of the process, starting with drafting the initial complaint.
We will represent you on a No Win No Fee basis, with no upfront fee required.
Following an initial, free telephone consultation with one of our experienced solicitors, we will open up a file for you and get the ball rolling with our investigations.
We will need you to provide us with any documentation you have from the adviser/lender (both from the time the advice was given and afterwards). We will, of course, seek to recover paperwork directly from the adviser/lender, however, the period where they are required to retain your records may have passed and therefore records may no longer be available.
Contact Thompsons today
If you think you have been mis-sold a financial product, then we would urge you to get in touch as soon as possible. Strict time limits apply to complaints and claims of this nature.
Phone for a free consultation today on 0800 0891 331.