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It is often flattering, and in the current economic times a commercial necessity, to wish to please a party who approaches us for help. In some instances you might view it as a mark of their respect for your standing in your professional community.

Whether the response you offer is intended to be advice or information is a judgement call at that time by you. It might be viewed pro bono and therefore to the same standard of skill and care you offer to your fee-paying clients or you might intend to offer a different, lower level of response depending on the nature of questioning or relationship.

In Rubenstein v HSBC Bank Plc [2011- EWHC 2304 (QB) we saw that the difference between information and advice is felt to be very low.

The case considered whether a financial adviser had given wrongful investment advice in providing details of an investment fund and subsequently provided incorrect information about the risks that were associated with the fund.

From the proceeds of the sale of the claimant's home the financial adviser was informed that a better interest rate was sought than the complainant was able to identify. The financial adviser provided details of a fund in an insurance-based bond and subsequently confirmed that the risk was the same as for cash in a deposit account. Following the banking crisis of 2008, the claimant withdrew their money from the fund and received less than the original capital investment.

The provision of information accompanied by a comment or value judgement was deemed to constitute advice. Fund selection and information given was in itself a value judgement and could constitute advice.

It should also be noted that the financial adviser failed to give correct information about the risks associated with the fund and the fund's suitability over other funds. The test of information and advice was whether an impartial observer would conclude that advice had been provided.

If a client made purely a financial factual enquiry then a response which simply provided information would not constitute them being advised. Had that client asked for a recommendation then any response was likely to be advice.

It was established that the crash of 2008 was not reasonably foreseeable by the financial adviser and was too remote to be recovered as damages. Some notional damages were awarded for the bank’s failure to follow FSA rules because the financial adviser would have recommended the fund even if the procedural rules had been followed.

All professionals need to consider the threshold point at which they impart information, as the threshold for them being determined to have provided advice is very low. Where a communication is intended to be ‘information only’ it should not be accompanied by a comment or be the result of a value judgement.

Suitable caveats and disclaimers should be considered by you. Assessing whether a positive business income can be derived to provide the enquiring party with a professional response must also be raised.

Karen Brown – director, Lockton
0117 906 5033

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