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Home » Features » Mis-selling of investments: what to do

Many investors may be eligible to get their money back from the investments you could have actually written off.

According to Patrick Hayes and Peter Faulkner, the principals behind Financial Investigation and Recovery in London, historically the mis-selling of financial products was carried out by smaller companies, for example financial advisers or boiler room operations.

Since the 1990s, when many smaller companies failed, leaving investors out of pocket, regulations have improved, as have the number of avenues for investors to get redress.

Who should you turn to?

Investors in the UK can get access to the Financial Ombudsman or the Financial Services Compensation Scheme. Both have been very active in helping consumers to get redress. Between 2001 and 2011, over £2 billion per year on average has been clawed back from banks and investment firms.

If a company is not regulated, it is still potentially possible to get some or all of your money back, for example by using a specialist litigator:

“It can be very helpful to us if you have kept the contract notes from your trades,” says Patrick Hayes. “This helps us to establish the most appropriate claims.”

Mis-selling of financial products, in the UK and further afield, has seen banks, building societies and financial advisers fail their clients repeatedly. Major high street names have been implicated in the mis-selling of higher risk investment products and the active concealment of fees. Staff dealing with customers have not been adequately trained to sell investment products.

There are now legal obligations on financial advisers and wealth managers at banks to take an individual’s financial circumstances into account when selling them investment products and private pensions.

Some products are designed to fail

Another major issue is that customers who have lost money in a scheme sometimes blame themselves for their own stupidity rather than the financial institution that placed their money in an unsuitable product in the first place.

Believe it or not, in the highly cynical world of banking, some products are designed to fail, as we saw with the some of the investment products Goldman Sachs dreamed up, investing in securitised mortgage debt.

It helps to retain a specialist claims consultant rather than a general law firm to manage your claim. But do make sure that this is a legitimate company.

In the UK, they will need to be regulated by the Ministry of Justice, and they should not be asking you for an up front fee.

A claims firm will help you to package and administer your claim, and will charge you a portion of this once it is restored to you. A typical figure is 20-25%, which may seem a lot, but it is better than getting nothing back.

“Do not feel it is partly your fault you have lost money,” says Peter Faulkner. “There are ways and means of getting your money back.”

As a rule of thumb, in the UK you can claim within six years of the transaction, Faulkner adds.

Do your homework

It is always worth examining any loss you have made from the mis-selling of financial products or shares, even be it in a high risk investment product that you have been sold by a third party.

Even if the advice you have received has come from a large institution like a major bank, that does not mean you have received the best advice.

It is always worth keeping notes of all your communications, including email.

But also do your homework on any company that you enlist to help you with your claim. Make sure the company you retain has had experience of taking on investment-related mis-selling before, and not just insurance.

This article is not investment advice. Investors should do their own research or consult a professional advisor.

Stuart Fieldhouse Editor

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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