Different Types of Financial Negligence

October 17, 2023    Civillawyers
Different Types of Financial Negligence

A financial advisor is responsible for making decisions on the client’s behalf and executing the appropriate actions and several types of financial negligence. He must also know his responsibilities and obligations, such as the responsibility of care, trustworthiness, and suitability. The inability to meet any of his commitments could be considered negligence.

Finances play an important part in our everyday lives. Every area of our existence needs financial resources. Money must be engaged in almost everything, whether setting a monthly budget, attempting to make investments in your money, operating a business, arranging a trip, or pretty much anything else.

It may get complicated and stressful, especially when large sums of money are involved. That is the reason why a financial counselor plays an important role in company and investing decisions.

Negligence in Finance

When seeking help from a financial advisor, it is natural to demand unquestioned skill, care, and correct management of the situation. If your financial advisers have given you inadequate financial guidance or failed to do due research, you can lodge an official complaint against them and their particular organisation.

If the financial adviser’s response is disappointing, you may sincerely appeal to the judiciary or an industry complaint structure, such as the FOS or Financial Ombudsman Service.

There are constraints on time for filing a dispute, and you should be aware that there are advantages and downsides to going to court or FOS. Handling an issue with a financial advisory organisation and its insurer on your own may be difficult, complex, and tedious.

Therefore, it is best to obtain professional assistance. Financial Negligence Lawyer Perth have extensive expertise in dealing with similar issues. They will explain your rights and offer concise guidance on whether to pursue a lawsuit for compensation.

Various Types of Financial Negligence –

One will come across various types of financial negligence by a financial adviser. A few of them are:

1. Failure to disclose potential conflicts of interest

A financial adviser may be encouraged to promote an investment not in their client’s best interests, such as earning a commission or another payment for selling the product. Besides that, the financial adviser does not take the time to understand their client’s requirements.

They don’t provide him/her with a statement of advice, which contains the advantages and cost of all the services or products, which they recommend.

2. Making inappropriate suggestions for investments

This happens when a financial adviser advises assets that are inappropriate for a client’s investing targets, risk tolerance, or financial circumstances. Besides that, providing inappropriate advice will lead to the breach of the financial adviser’s lawful obligations.

When the advisers provide inappropriate recommendations, it becomes difficult for the client to offer an informed consent.

3. Taking part in insider trading

This happens when an investment professional utilises confidential data to execute trades for their or their customers’ gain. Even though the transaction they get to make surely benefits their clients or themselves, it’s completely based on insider knowledge, which is illegal in Australia. Furthermore, in Australia, participating in insider trading will lead to 10 years of imprisonment or a fine of $450,000 must be paid.

4. Violation of Fiduciary Duty

Financial advisers are committed to their customers and must always work to their best advantage. A violation of fiduciary responsibility occurs when an advisor in financial services prioritises their interests over the needs of their clients.

Financial advisers also violate the fiduciary duty when they fail to provide their clients with fair and complete disclosures, don’t disclose conflicts of interest, and take part in security-related fraud.

5. Missing Out the Tax Filing Returns

Financial advisers must always update their clients on when they should file for tax returns. The client might end up facing various types of penalties, which can be pretty severe. Failing to file the returns within the given time will also attract extra interest for every month until he/she files the return.

Late filing or missing the tax filing returns will also lead to delayed refunds. These types of delays can lead to unwanted monetary strains and inconveniences for him/her.

6. Making Mistakes in Accounting or Auditing

At times, the financial adviser might make errors in the area of accounting or auditing, which is known as malpractice. One might think that “malpractice” is related to healthcare providers and physicians. But that’s not true.

Malpractice can also take place due to other professionals, including the financial adviser. These types of errors take place when the adviser does not provide their service at a specific level, which is normally expected from a financial adviser.

7. Providing Incorrect Tax Advice

Every financial adviser carries a duty of care towards their client when providing tax-related advice. That way, clients will come across some of the best items/products, which can reduce their tax liability.

It’s not illegal to avoid tax with the help of investment schemes because they are tax efficient. But it’s a criminal offence when one deliberately or intentionally tries to avoid paying taxes, which constitutes tax fraud or money laundering. Financial advisers who provide wrong tax advice to their clients can lead to penalties and business or individual monetary losses.

8. Avoiding the Excessive Risk of an Investment

Every investment comes with some type of risk. Some risks can be bigger, and others can be smaller. But at times, it’s important to know when to avoid a high level of risk in an investment, and it’s something only a financial adviser can tell you. If the financial adviser does not provide him/her information about certain investments and whether or not the risk is high or lost, it can lead to unwanted issues.

In conclusion

Taking legal action against a financial professional is a serious choice that shouldn’t be taken lightly. Clients who think their financial professional harmed them should seek legal advice to analyse their alternatives and select the best plan of action.

Fraudulent actions by a financial advisor can harm you to a great extent. It becomes imperative to choose the best legal assistance in such circumstances and file for claim against financial advisor.

Getting in touch with an experienced lawyer would help you to a great extent. They will understand the plight of the situation, identify the fraudulent practices, and offer the best solutions that can minimize your damage. If you have been a victim of financial negligence by your financial advisor, associate with the top lawyers and get your rights back now.

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