A client, who claimed his financial adviser should have told him to complain about pension advice by a previous adviser, has had his case thrown out by the High Court.  The case clearly sets out limits to financial advisers’ professional duty to their clients.

The client, Mr Denning, had been advised by his first financial adviser in 2000 to transfer his pension from his final salary pension scheme to a personal pension. After this pension failed to perform as expected, Mr Denning was advised to transfer the personal pension into a phased retirement plan in 2007.

Mr Denning became dissatisfied with his first adviser and in 2008 appointed Greenhalgh Financial Services Limited (GFS) instead to manage his investments.  He then went on to complain unsuccessfully to the Financial Ombudsman Service about his first adviser.  He also had to abandon a court action against the first adviser as the case was out of time.

After his attempts to claim against his first adviser failed, Mr Denning started an action against GFS.  He claimed that GFS should have told him that the advice he had received from his first adviser was deficient and advised him to make a claim for professional negligence against them.  He said had they done so, he could have taken a claim to court earlier, before it was out of time.

Mr Denning had signed a Client Agreement with GFS which did not mention advising on the previous pension transfers.  GFS’s fee agreement also clearly stated that the firm was not qualified to provide legal advice. The case therefore centred on whether GFS had a wider duty of care to advise Mr Denning on his previous adviser’s failings. 

The judge found in favour of GFS.  He concluded that at no point had Mr Denning asked GFS to provide advice about the previous pension transfer and said that the firm did not owe a duty of care to Mr Denning outside the scope of its Client Agreement.

It is good news for financial advisers and their insurers that there is no duty to advise on historic matters unless instructed to do so,” said James Burgoyne, Director – Claims & Technical, Brunel Professions.  “The case does, however, emphasise the importance of having a carefully worded retainer letter which sets out clearly the exact duties of the adviser.”

Reports on the case have been published by Money Marketing, solicitors Wright Hassall and barristers 4 New Square.

Brunel secures competitive professional indemnity insurance cover for financial advisers. To find out more call Mark Sommariva on 0203 475 3275.