Case Study: Helping a Grandmother Claim Against Her Negligent Financial Advisor
If you have put your finances into the hands of a professional only to lose money because of their bad advice, you might have a claim for negligence. This is exactly what happened to our client.
For confidentiality purposes, names in this blog have been changed.
Our client, Sophie, was made Attorney for her grandmother Mary in 2017. Mary had struggled with her sight for several years and, in her late 80s, was starting to need more help in day-to-day life.
Among other things, Sophie decided it was time to sit down and review her grandmother’s finances. As she looked through the paperwork, she was concerned at what she found.
Uncovering bad financial advice
Mary met her financial advisor, Mr Smith, in 2004. Her brother had recently died and left an inheritance, and she contacted Mr Smith for advice around how to manage the money. Mary was already struggling with her sight and relied on Mr Smith to explain concepts and read aloud to her.
Mr Smith noted that Mary had a home worth £250,000 with no mortgage and about £250,000 in savings, shares and investments. He told her that he had come up with a plan to save her lots of money in mitigating inheritance tax. This plan involved an equity release scheme.
He set up a meeting with his colleague, who advised Mary to take out £100,000 of equity in her home and invest £150,000 into a Discounted Gift Trust, promising that this would save her £60,000 in inheritance tax.
Trusting their advice, Mary did as they said.
Discovering the problem
Thirteen years later, Sophie was aghast to discover that her grandmother had entered into an equity release mortgage. As her grandmother had paid off her mortgage many years ago, she was stunned to discover a growing mortgage of £250,000.
When Sophie spoke to her grandmother, Mary could not remember having entered into the equity release. She was shocked when Sophie told her how much was outstanding.
A practising solicitor herself, Sophie felt that her grandmother had received negligent financial advice from Mr Smith and his Firm. She immediately made a data subject access request to ask for her grandmother’s file. In the meantime, she spoke to a trusted mortgage broker, who recommended our team at Burt Brill & Cardens to help fight for her grandmother’s cause.
Mr Smith and his colleague had not been acting in Mary’s best interests, and the equity release had certainly not been a suitable product for her. While this was clear, our team still had to grapple with the strict time limits around making a claim for professional negligence.
The Limitation Act 1980 allows a period of just 6 years from the date that you ‘suffered damage’ to make a claim. Sophie’s grandmother had been given the bad financial advice 12 years before – double the deadline. Our team felt the Court would immediately dismiss the case on the basis of the time limit.
In addition to this, there was a chance that Mary may have to give evidence in Court, which she was likely to find distressing.
Rather than take the case to Court, we made the decision to go to the Financial Ombudsman Service. The Financial Ombudsman have a duty to regulate the financial services sector and were more likely to take a different approach to the time limits than the Court.
We gathered all of the evidence and used our expertise in both the law and the financial regulations to represent Mary’s case, displaying why and how Mr Smith’s Firm had been negligent.
The case was hard fought as Mr Smith and his Firm also made submissions to the Ombudsman in their defence, which our team dealt with.
The outcome: misleading, inappropriate, and unfair
The Ombudsman found that the advice from Mr Smith to Mary was misleading, inappropriate, and unfair, and that Mary had not needed an equity release to provide additional income, or that it was a suitable recommendation for inheritance tax mitigation.
Their final decision found that Mary was elderly and relied on Mr Smith and his Firm, and couldn’t have known that she was being given bad advice. They found if Mary had not been advised to take out the equity release, she would not have had a mortgage at all and would not have been liable for the interest payable on that mortgage.
The Ombudsman therefore felt that Mr Smith’s Firm should repay all the mortgage interest themselves. In addition, they stated that the Firm must award Mary compensation for the distress and inconvenience arising from their unsuitable advice.
Does this situation look familiar?
Our first step will be to arrange a diagnostic meeting with a solicitor in our Dispute Resolution team. The meeting can be over the phone, in person, or video call. We will discuss:
- Whether or not your case is likely to be in time or not.
- Your specific circumstances and the factors involved.
- The law around your case.
- Whether you can make a claim and how best to obtain it.
- How we can help in the most time and cost-effective way.
Alex works in professional negligence, contentious probate, and court of protection litigation. He also has a particular specialism in negligence claims in the financial services sector, including cases against financial advisers and pension providers relating to negligent mis-selling and mismanagement of both pensions and investments.Read More About Alex