Common Financial Adviser Negligence Claims
Routes to Recovery — FOS, FSCS, and Civil Claim
- 1Financial Ombudsman Service (FOS) — free to consumers; can award up to £415,000 per complaint (2024 limit) against FCA-regulated firms. The FOS uses a "fair and reasonable" standard, which is often more favourable to consumers than the strict Bolam negligence test. FOS decisions are binding on the firm if the complainant accepts them. The FOS is usually the first step for claims against FCA-authorised advisers who are still trading.
- 2Financial Services Compensation Scheme (FSCS) — where the adviser's firm has become insolvent and cannot meet its obligations, the FSCS compensates eligible claimants up to £85,000 per person per firm for investment advice. For pension transfer advice claims, the FSCS cover applies to the full calculated redress. FSCS claims are processed directly or through a claims management company — a specialist solicitor maximises the redress calculation.
- 3Civil negligence claim — where the FOS does not have jurisdiction (for example, business clients, or claims over the FOS limit), or where the FOS approach is not suitable for a complex claim, a civil negligence claim is brought in the courts. The claim is typically against the adviser's professional indemnity insurer. Expert evidence from an independent financial adviser or investment professional is required to establish the breach of the suitability standard.
Frequently Asked Questions
I transferred my DB pension on advice — how is the redress calculated?
The FCA's Pension Transfer Redress Methodology (PS22/13, updated 2023) requires advisers to compare what you would have received had you remained in the DB scheme (the "comparator") against what you will receive from the personal pension (the "actual"), and to pay the difference as a lump sum to top up the personal pension to the comparator level. The calculation uses actuarial assumptions and is technically complex — errors in the calculation by the adviser's insurer can significantly understate the redress due. A specialist solicitor with a pension actuary verifies the redress calculation to ensure it is not understated.
The adviser says I was told about the risks and signed a risk questionnaire — does that prevent a claim?
Not necessarily — a signed risk questionnaire is a record of the client's stated risk profile, not a defence to unsuitable advice. Where the adviser recommended a portfolio that materially departed from the client's stated risk profile, or where the risk profile was not properly explained or assessed, the signed questionnaire does not cure the unsuitability. The FOS and courts regularly uphold claims where risk documentation exists — the question is whether the advice was suitable for the client's actual circumstances and objectives.
The adviser firm has gone into administration — am I still entitled to redress?
Yes — the FSCS covers eligible investment advice claims up to £85,000 per person per firm. For DB pension transfer claims, FSCS cover is not subject to the £85,000 cap in the same way — the FSCS calculates the full pension redress and pays up to the eligible limit. A specialist solicitor ensures your FSCS claim is correctly framed and that the redress calculation presented to FSCS is not understated.
Can I bring a claim if I am a business (not a consumer)?
Yes — the FOS covers complaints from eligible businesses (micro-enterprises and small charities), but many business adviser negligence claims fall outside the FOS jurisdiction by reason of the client's size or sophistication. In those cases, a civil professional negligence claim is the appropriate route. The duty of care owed to a business client may be broader or narrower than to a retail consumer depending on the client's sophistication — a specialist solicitor analyses the duty owed in each case.
How are investment losses assessed in a civil financial adviser negligence claim?
The basic measure is the difference between: (i) what the claimant actually has (the portfolio value after the negligent advice); and (ii) what they would have had but for the negligence — typically, the return on a suitable portfolio that matched their actual risk profile. This "what would have happened" comparison requires expert evidence from an independent IFA and, often, an investment analyst or fund expert. Consequential losses — tax charges triggered by the unsuitable investment, loss of DB pension benefits foregone on transfer — are also recoverable as foreseeable consequences of the negligence.