Organising finances is one of the more quotidian tasks an individual or business can undertake, even if doing so is necessary for tax or wealth protection. Not only is it quotidian, but it can also be somewhat arcane to those less versed in financial systems and tax law – leading many to defer such decisions to independent advisors and financial specialists. But what happens when these specialists get it wrong too? Financial negligence can cost serious amounts of money to businesses and individuals – but what exactly is it?
What is Financial Negligence?
Financial negligence, simply put, is the failure by a financial professional to handle your finances properly. Financial negligence is a form of professional negligence that occurs where you are financially harmed by the advice or actions of an organisation or individual.
This can happen in a number of ways, from the giving of improper financial advice to the embezzlement of funds and beyond. As such, the field of financial negligence is a broad one, that describes a variety of potential situations that range from simple failures to provide services as rendered, to white-collar crime and significant illegal activity.
“People seek financial assistance for various reasons” – says Shania Brenson, the founder of 15M Finance. “Some of them have not been able to achieve their financial goals for a long time. Others are planning a major purchase or want to start saving money for retirement, so they need to revise their budget in accordance with their changed financial goals. However, choosing the right professional is often complicated because of the large number of offers available on the market. To prevent yourself from financial negligence, you need to be careful at the selecting stage. First, ask your friends for recommendations. It will be great if it’s someone who has already faced a similar problem, so you will know that the financial professional is competent in your situation. It’s also important to make sure that the specialist is the person you feel comfortable with. Additionally, ask about a license, if required, and check whether you understand each other. Otherwise, you will have to wade through incomprehensible professional terms, which can make your future communication quite difficult.”
Typical Culprits of Financial Negligence
The key types of financial professional that could be capable of financial negligence include wealth management professionals and stockbrokers, as well as accountants and general financial advisors. Financial negligence takes many forms, and as such can be perpetrated from a number of responsible roles within financial services and wealth management – but what exactly could financial negligence look like?
The Hallmarks of Financial Negligence
One common example of financial negligence relates to tax responsibilities. If you are a small business owner or freelancer, you might use a third-party accounting service to handle your finances and tax returns on your behalf. Financial negligence would occur where this service would fail to properly advise you on your tax responsibilities – leading you to pay too much. Alternatively, they might fail to file your tax return altogether.
Another common example can be found in wealth management. Stockbrokers are often trusted to make key financial and investment decisions for the benefit of an individual or business; a failure to notify you of the risks inherent to some of their prospective moves would be tantamount to negligence, especially where that risk is realised.
What Should You Do?
If you believe yourself to have fallen victim to financial negligence of any kind, you may have a civil route to compensation through making a financial negligence claim. If you are not the only victim, your case could be strengthened by collaborating with other victims as part of a ‘mass action’ legal challenge.
Complete compensation is not guaranteed – particularly if the organisation culpable for the negligence has entered administration, or the individual in question has declared bankruptcy. Still, the legal route is the most effective route for recouping your losses.