Financial advisers ordered to pay £223,000 in negligence case

Published: 6 March 2017

Category: Legal News

A financial services company has been ordered to pay £223,000 compensation in a professional negligence case in which one of its advisers failed to apply reasonable skill and care when carrying out his duties.

The case involved a 96-year-old woman who had left the UK in 1948 and eventually settled in Costa Rica.

In 2001, she engaged a financial adviser to help her manage her investment portfolio of £567,000.

Under the adviser’s guidance, she converted her investment portfolio into a "gift and loan trust scheme" by which the assets were moved to an offshore discretionary trust. The adviser falsely confirmed to his supervisor that the woman had also received professional legal and tax advice.

He also told the woman that the annual charges would be 2%, whereas in reality they amounted to a far higher sum.

In 2009, the woman suffered a stroke. He children examined her financial affairs and became concerned about the erosion of capital in the trust and the level of charges. They took legal action on the basis that the investment products provided by the adviser had been unsuitable and that the charges were excessive.

The court found in the family’s favour. The judge held that the adviser had failed to consider the woman's country of residence as relevant to her financial planning and had ignored the fact that her portfolio in 2001 contained exempt gifts which could safely be left in the UK.

He had been negligent in the discharge of his duty, since a competent adviser would have known that domicile was a critical issue in tax planning.

That negligence was compounded by his false statement to his supervisors that the woman had taken independent tax advice.

It was obvious that the adviser did not understand some of the key fundamentals of tax planning and had failed to apply reasonable skill and care to the discharge of his professional duties.

The woman was awarded £223,000 compensation to cover her losses.

Please contact Matthew Sigsworth in our Dispute Resolution Team if you would like more information about the issues raised in this article or any aspect of professional negligence claims.