How we can help if you suspect a new client has received poor advice from a previous adviser

As well as helping financial firms defend against complex complaints, another aspect of the work we do is to help IFAs get redress for new clients where they have been mis-sold to by their previous adviser.

Unfortunately, we’ve found that many IFAs have met clients who have received bad advice or been mis-sold to. But, while you may want to assist your client in making a complaint against a previous adviser, you need to tread carefully.

With the FCA imposing strict warnings to IFAs against advising clients on a complaint, you could face serious implications.

If you don’t have the prerequisite permissions, we can help.

An unextraordinary retail investor was advised to invest in a notoriously complex and volatile product

Mr G was introduced to a new IFA after a bad experience with his previous adviser.

During the fact-find stage of onboarding, the new adviser quickly realised that Mr G had previously invested in a Contract For Difference (CFD) product. As they are notoriously complex and very volatile trading products, CFDs are usually only recommended for professional investors.

Surprised to learn of the CFD investment, the new IFA asked a few more questions and soon confirmed his initial gut instinct – that Mr G was a non-sophisticated retail investor – was correct.

Furthermore, Mr G was not a professional client, or particularly successful or wealthy. At the time of the advice, he was working as an IT consultant.

Despite his lack of wealth or investing experience, Mr G’s previous adviser recommended that he open a CFD account with a third party where the introducing IFA recommended an investment manager to operate on a discretionary basis.

The adviser arranged an investment of ￡50,000.

Within months, the whole investment was lost.

As both the IFA and investment manager had subsequently gone bust, Mr G had been left high and dry. Then, his new IFA advised him that there may be grounds for a successful claim with the Financial Services Compensation Scheme (FSCS).

Action

Knowing Mr G had strong grounds to lodge a complaint, his new adviser approached us for support and advice.

As usual, we started by looking at the facts of the matter.

As you might expect, the marketing material states that these products are only “suited to professional clients who have a high risk tolerance”.

In drafting the formal complaint, we pointed out that such complex leveraged investment products are wholly unsuitable to retail investors like Mr G.

The previous IFA and investment manager clearly failed to properly assess Mr G’s classification and suitability for such investments. Had either done so, they would have concluded that Mr G was a regular retail client. And, as such, a highly unsuitable candidate for such a high risk investment in any type of CFD or similar complex investment product.

Despite promises of “risk mitigation” and in particular, the employment of a “stop loss” strategy, where the manager would adopt a 2% stop loss across all positions, there was no discipline employed in managing the accounts.

Indeed, when examining what happened to Mr G, it was clear that his investment was churned in order to derive excess commission for the IFA and investment manager

.Having reviewed thehistory of the account, gathered all the client documents, we provided a clear and detailed claim to the FSCS.

Outcome

Mr G received full reimbursement of all the money he’d invested in the ill-advised CFD, plus interest.

Before the payment was made, we told a delighted Mr G that he should go back to his new adviser and thank him for introducing us and ask for some proper advice!

He did just that and is now happily invested in a wholly suitable investment product.

Key takeaways

The Financial Conduct Authority (FCA) began regulating claims management companies (CMCs) on April 1, 2019. In doing so they have made it clear that advisers must not undertake claims management advice if they are not authorised to do so.

This means that without the proper FCA permission, you can’t pursue a claim on a customer’s behalf, so you’ll need to outsource – which is where we come in.

If you have a new client who you think may have cause for complaint about previous advice they’ve received, we can help.

Our claims management service – Solution Claims – is designed exclusively for regulated professionals to refer their customers to so we can help them get the redress they deserve.

We won’t pursue a complaint for the sake of it but where your client has clearly been mis-sold to, we are here to help.

We work on a no win, no fee basis, and have a cap on our fees.

Get in touch

If you have a new client who has received poor advice from a previous adviser, please get in touch.

Our position as a trusted adviser is earned by delivering expert advice and exceptional service. So, if you’re interested in working with us and would like to hear about first-hand experience from one of our existing clients, we’d be happy to introduce you.

Please email [email protected], book a short call by completing our online form, or call 029 2000 2325.

From the team at Jencap Partners