Have you suffered financial losses due to bad investment advice? Many investors in the UK only realise they’ve been misled when their supposedly low-risk portfolio collapses in value. If your financial adviser failed to act with the competence and diligence expected under UK law, you may be eligible to bring a professional negligence claim and recover your losses.
This detailed guide will walk you through when negligent advice crosses the legal threshold, how to prove your claim, what compensation you can expect, and the key decisions that will impact your success.
When Can You Sue a Financial Adviser?
Financial advisers in the UK must be authorised by the Financial Conduct Authority (FCA), and they are legally obligated to tailor their recommendations to your specific financial circumstances, risk profile, and investment objectives. When advisers breach these standards, they may be liable for the financial harm you suffer.
Typical triggers for litigation include:
- Recommending high-risk or unregulated collective investment schemes (UCIS) to clients seeking low-risk products.
- Failing to explain the true risks, charges or exit penalties attached to the investment.
- Advising extensive pension transfers into self-invested personal pensions (SIPPs) without suitability checks.
- Ignoring diversification principles and over-concentrating a portfolio in a single asset class.
- Misrepresenting tax-motivated schemes that later attract HMRC scrutiny and Accelerated Payment Notices.
Where such advice causes a quantifiable loss, a professional negligence claim may be available in addition to regulatory complaints.
The Legal Test for Financial Adviser Negligence
To bring a successful claim, you must prove three key legal elements on the balance of probabilities.
First, you must show that the adviser owed you a duty of care, which will usually arise from a contractual relationship and statutory regulatory duties under the FCA regime. In many cases, advisers also owe fiduciary duties to act in your best interests.
Second, there must be evidence of a breach of duty, meaning the adviser’s conduct fell below the standard expected of a reasonably competent financial professional in the same circumstances. This breach might involve unsuitable product recommendations, failure to perform risk assessments, or a lack of transparency around fees or penalties.
Third, the breach must have caused your financial loss. Courts apply a “but for” test, in which court asks whether you would have suffered the loss if competent advice had been given.
Additionally, the SAAMCO principle may limit compensation to losses that were within the scope of the adviser’s duty. Expert forensic evidence is often required to compare the likely financial outcomes had proper advice been given against what actually happened.
Time Limits – The Limitation Act 1980
Most professional negligence actions must be issued:
| Period | Trigger Event | Statutory Basis |
| 6 years | Date the negligent advice was given | Section 2 Limitation Act 1980 |
| 3 years | Date you first knew (or could reasonably have known) the material facts about the negligence | Section 14A Limitation Act 1980 |
| 15 years | Long-stop, absolute bar regardless of knowledge | Section 14B Limitation Act 1980 |
The time limits for professional negligence claims can be complex. For instance, the clock may start ticking when an investor should have made enquiries, even if the full scale of the loss wasn’t yet clear. That’s why it’s crucial to seek legal advice as soon as possible.
Should You Complain to the Regulator or Issue Court Proceedings?
Before commencing court action, investors should consider alternative routes to redress. Most FCA-authorised firms must operate a written complaints procedure, which can often be a useful first step to resolving the issue internally.
The Financial Ombudsman Service (FOS) provides an independent, no-cost forum for claims up to £430,000. FOS can be an efficient option for investors seeking a quicker resolution. However, it is best suited to straightforward claims and regulated products. More complex cases, or those involving larger losses, may need to proceed to the civil courts.
For higher-value matters, a claim must comply with the Professional Negligence Pre-Action Protocol, starting with a Letter of Claim that sets out the background, alleged breaches, the losses suffered, and evidence relied upon. Selecting the wrong route can affect your chances of recovery or even jeopardise your case due to time limits, so early specialist advice is vital.
How Much Compensation Can You Recover?
The purpose of compensation in financial negligence claims is to restore you, as far as money can, to the financial position you would have been in had competent advice been given.
This can include not just the capital you lost on the investment, but also any additional returns you would have earned through a proper investment strategy. You may also be entitled to recover fees paid, exit penalties, tax liabilities, and interest under Section 35A of the Senior Courts Act 1981.
If your case involves a “loss of chance”, for example, that you missed an opportunity to invest elsewhere, the court will assess the likelihood of that chance materialising and discount your damages accordingly. These assessments are fact-sensitive and often require expert valuation evidence.
Funding a Financial Negligence Claim
High-value negligence litigation can be funded in several ways:
- Conditional Fee Agreements (“no win, no fee”) – The firm shares risk and recovers a success fee from the defendant or your damages.
- After-the-Event (ATE) Insurance – Protects you against adverse costs if the claim fails.
- Third-Party Litigation Funding – Available for cases exceeding c. £250k where prospects of recovery are strong.
A cost-benefit analysis needs to be performed before recommending the optimal structure.
Need Expert Legal Advice on Financial Adviser Negligence?
Do you have a negligence claim against a financial adviser? If you want expert legal advice, do not delay in instructing us so we can assess the legal merit of your case.
We can often take on such claims on a no win no fee basis (such as a Conditional Fee Arrangement or Damages Based Agreement) once we have discussed the claim with you and then assessed and advised you on the merits of the proposed professional negligence action.
Our expert legal team of leading Professional Negligence Solicitors & Barristers can provide urgent help, advice or representation to you. Just call our Professional Negligence Lawyers on 02071830529 or email us now.
Want legal advice on the merits of your case?
Your legal enquiry goes immediately to our PN litigation team in Middle Temple, London. We can’t take on low value cases or give free legal advice – our minimum fee is £1650 +VAT for a conference with a solicitor and barrister. Call us on +442071830529.
Frequently Asked Questions
Is poor investment performance enough to sue?
No. Markets fluctuate. You must show that an adviser’s breach, not normal volatility, caused your loss.
Can I claim if I accepted the risks in writing?
Possibly. Advisers cannot contract out of FCA duties; a generic risk warning does not excuse recommending a patently unsuitable product.
What if my adviser has gone bust?
Most professionals carry indemnity insurance with minimum cover of £3 million. Claims target the insurer, ensuring viable recovery.
How long will my case take?
Simple FOS complaints resolve within twelve months. High Court claims may run 18-30 months but often settle at mediation once expert evidence is exchanged.
Will I have to go to court?
Fewer than 10% of professional negligence claims reach trial. Early settlement remains the commercial priority.
