Every bank must be liable for incorrect financial advice. If a financial advisor provides insufficient or misleading information to an investor, he or she can seek compensation. However, this is often difficult to enforce. Because of the burden of proof rests with the investors.
In principle, an investment advisor is obliged to correctly inform his clients about all essential aspects of an investment. Regardless of a specific product, he must first ask what his client knows about securities, what he would like to invest the money for, what investments he already has and how much risk he is willing to take. If bank customers are forced to use products that do not fit their risk profile and life situation, this is wrong financial advice. Then investors are entitled to compensation.
- The advisor recommends a senior citizen shares in a risky real estate fund or bonds from a bond issuer with questionable creditworthiness , even though the customer only wants to supplement his pension.
- The financial advisor hides the risks of a product. This is viewed by some courts as false financial advice even if the customer was willing to take higher risks for higher returns.
The burden of proof rests with the investors
What the consultant said in the customer meeting can often not be reconstructed exactly in retrospect. The advice protocol, which has now been prescribed, was supposed to remedy this. But consumer advocates criticize the fact that in practice it helps the banks to protect themselves from lawsuits rather than the customers in enforcing their claims. Investors only get compensation if they can prove wrong financial advice. Most of the time, the courts hear the investor, any companions and the advisor. Incorrect advice is proven if the court is convinced that it is established after the evidence has been taken. If doubts remain, it is at the expense of investors.
Compensation for hidden commissions
Investors, on the other hand, have a good chance of claiming compensation if banks collect commissions from product providers behind their backs . The case law is now clear: If the bank receives money for a certain investment recommendation, it must disclose this during the consultation. The central argument in the judgments of the courts: Investors cannot make a reasonable decision for or against an investment without knowing the bank’s self-interest. The banks therefore have to pay for losses if they received secret commissions.
The secret commissions have long been documented in countless legal proceedings. The courts assume in favor of the investors that they would have waived the investment if the bank had correctly informed them about the commissions.
They therefore condemn the financial institutions to repay the entire investment amount – of course, minus the amount that the fund units are still worth in the end.
Only claim damages from the bank
Without a lawyer, damages against banks, savings banks will not be applied. However, you should write to the bank yourself first. Because then the financial institutions have to pay all legal fees in case they are sentenced to compensation.
Background: Legal fees that were incurred prior to a legal dispute do not have to replace convicted financial institutions- unless you first claim the damages yourself before you call a lawyer. Then you can also request compensation for out-of-court attorney’s fees. These fees can amount to well over 1,000 dollars, depending on the amount of the claim for damages.
Formulate the letter to the bank
This is how you should proceed with your claim for damages from the bank:
- Write to the bank, savings bank that advised you on investing.
- State the investment, the date of the conclusion of the contract and, if possible, the consultation appointments.
- Show how much money you lost on the investment.
- In the case of funds that you cannot sell, request the reimbursement of the entire investment step by step in exchange for the return of the fund units.
- Claim: The financial institution collected commissions for this investment without informing you.
- Request compensation for the losses within a reasonable time. What is appropriate depends on how long it was since you bought the asset and how complex the case is. Usually three to four weeks are sufficient time for the bank to examine possible claims and respond.
- Announce hiring a lawyer as soon as the deadline has passed.
- Send the letter as a registered letter with acknowledgment of receipt or have it personally put into the mailbox of the financial institution by a reliable messenger who is available as a witness if necessary.
- If you mistakenly wrongly claim damages or if you make mistakes in the letter of claim and it is ineffective, it will not do any harm. In the worst case, you only have to pay the costs for out-of-court representation by your lawyer yourself. If you forego a letter of claim from the outset, however, it is clear that you will definitely have to take over this part of the lawyer’s bill yourself.
Wrong financial advice – find the right lawyer
- Anyone who feels they have been loaded by their financial advisor should look for a law firm specializing in banking law that exclusively represents investors – and not also intermediaries, fund companies or even banks and savings banks. It is beneficial if you find a law firm that has already successfully enforced claims for damages against your bank. You can usually assess the chances of success of your claim faster and more reliably. Search on the Internet and the business directory. Ask if you are missing information.
- There is no general answer to whether it is better to involve a single lawyer, a small or a large law firm. In the case of individual lawyers and small law firms, the client care is sometimes better and more personal. Good, large law firms can sometimes fall back on more relevant experience and special know-how.
- Be skeptical if you come across interest groups or similar associations. Self-help and networking initiated by those affected are a good idea and can be useful. Interest groups of aggrieved investors are often initiated and controlled by lawyers. You want to acquire clients in this way. You are often better advised to hire a law firm directly.
- Many law firms offer the initial consultation, including a check of the chances of success, for a flat rate of 100 to 200 dollars. An initial consultation shouldn’t cost more than 250 dollars anyway. An advance payment on the fee is usually only due when the lawyer is actually supposed to take action.