Promises from financial advisers that savings and investments are under a continuing review have come under the scrutiny of the High Court in London.
A couple who invested money on the advice of Lloyds Bank which went on to make them a loss of £43,000 challenged the bank’s promise to review the investment.
The couple – named as Mr and Mrs Worthing – argued the bank failed with a duty of care to provide continuing regulated advice.
However, the court found that the bank acted reasonably and had no duty to correct advice given to customers even if that advice led them to lose money.
The case Worthing and Another v Lloyds Bank plc  EWHC 2836 (QB) basically rips up any confidence investors might have in their advisers offering them redress, even if the original advice was bad for them.
No duty to correct bad advice
The court highlighted three main points for financial institutions to show that they acted in good faith when giving investment advice – and investors should consider they act in reverse if they are dissatisfied with their financial advisers.
The court said:
- Financial advisers should offer customers standardised documentation when explaining products and risks
- Financial firms have no obligation to reassess the customer’s attitude to risk when carrying out an investment review
- Advisers should make notes when speaking to customers to show the points covered during their discussions
Judge dismissed claim for compensation
The court dismissed the couple’s claim.
The judge remarked that the bank had no continuing duty regarding the original investment advice – effectively saying that when an adviser has given an opinion, whether it is correct or not, the provider’s duty of care to the customer ends.
The verdict signals that a court will be reluctant to rule in favour of consumers who have lost money as a result of investment advice and then try to recover their losses by claiming they received bad advice.
The ruling comes down clearly on the side of financial institutions and follows similar recent decisions made by financial ombudsmen.
However, the ruling does not stop a consumer approaching the Financial Conduct Authority (FCA) or a financial ombudsman.