Acting on advice from a professional can sometimes go wrong and though you can seek redress, time is against you.

When you pay someone for investment advice, by fee or commission and it proves poor, wrong or fraudulent, you can seek to recover your losses.

Do you have a claim?

In recent years, has been a substantial increase in claims against financial advisers and professionals, mainly concerning financial investment mis-selling and tax avoidance schemes.

Mis-selling claims generally arise when someone invests into a fund following professional advice, only to discover that when they try to drawdown on their investment, they are unable to.

Where an individual has lost money through financial investments, it fairly easy to trace and so a claim for potential negligence can be identified swiftly.

Claims relating to tax planning schemes, however, can take years for a claim to materialise,  usually as a result of an open enquiry from HMRC into a previous Tax Return.

Evidence and actions

With any claim, you will need to collate all communication to determine exactly what advice was given to the individual and what risk they have been prepared to accept.  

A solicitor with experience of litigating against professional advisers will look to establish the causation position i.e., was appropriate advice given, etc.

The Courts know that parties are recalling matters retrospectively with perfect hindsight, so each client must demonstrate with documentary evidence, where possible, their mind-set and plans at the time.

It is necessary to establish what ‘Know Your Client’ work was undertaken and whether the adviser fully understood:

  • What the individual wanted out of the investment
  • The timeline over which the investment was to run
  • What likely returns the investor expected from the investment
  • How much risk the investor had agreed to accept
  • How much of their portfolio the investor was willing to stake

It’s unlikely the adviser can provided sufficient proof to justify their investment decisions if no such conversation took place.

With tax schemes, an investor must have been made aware of all potential risks involved so they can make an informed decision and documentary evidence should sent to the client.   

For the advisor to ascertain whether a scheme is appropriate, they should have assessed the investor’s risk profile. If, however, this information is unavailable, it could form the basis of a negligence claim.

When money is lost or HMRC have served an Accelerated Payment Notice, Follower Notice or Demand for Payment, the individual concerned should speak to an experienced solicitor to examine whether there is potential for a professional negligence claim.

Timeline for claims

The Limitation Act 1980 dictates that any claim must be commenced prior to the limitation date, although the valid period and length of time in which to bring a claim will vary.

The starting point is generally six years from the breach of contract but, it is common in tax avoidance cases concerning HMRC for it to be three years from the date an investor is reasonably put on notice as to the potential for a claim.

If limitation is nearing, the solicitor has two options:

  • work with the negligent professional to initiate a Standstill Agreement to allow investigation before proceedings are issued, which freezes time for a period agreed between the parties
  • protective proceedings can be issued, with a Claim Form at Court allowing 4 months to formalise the claim and serve the relevant documents on the adviser


The solicitor will decide whether the claim should be pursued through the Financial Ombudsman Service (FOS), Financial Services Compensation Scheme (FSCS) or the Courts.

If professional negligence proceedings are commenced, as part of the Professional Negligence Pre-Action Protocol, the solicitor will draft a Letter before Claim, which gives the negligent adviser or their insurers three months and three weeks to respond.

If proceedings are issued, the parties must adhere to the timeframes imposed by the Court, with any trial likely to start in 9 to 24 months’ time.

If the claim is for less than £150,000, the FOS may be appropriate. If the professional has gone out of business then it may be possible to claim via the FSCS (depending on the position with ongoing insurance), however, this is likely to be subject to a cap of £50,000.

When making investment decisions based on advice from professionals, there are warning signs individuals can watch for and actions they can take to mitigate losses. But, the only way for individuals can receive the compensation they deserve is to talk to a solicitor and make a claim… before it’s too late.

[Source: Sarah Perry, Managing Partner of law firm Wright Hassall]