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Financial Planning Lawsuits

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What are Financial Planning Lawsuits?

Financial planning lawsuits may result when one party causes losses due to their faulty financial advising. In a business context, this can happen when a business organization hires an outside group to do financial consulting with them. Such arrangements are typically done according to a services contract, which spells out the various risks and liabilities involved for each party. Sometimes, the advisor is hired specifically to help the company draft a workable business plan.

In many cases, a principal-agent relationship exists between the financial advisor and their business client. This means that the financial advisor or planner owes a duty of care to the business client to ensure that the financial plans are in the best interests of the company. Financial planning lawsuits can arise when such duties of care are violated.

What are Some Common Reasons for Filing a Financial Planning Lawsuit?

As mentioned, financial planning professionals owe a duty of care to the client. Financial planning legal disputes can arise if the financial advisor:

  • Uses company funds or information for their own profit
  • Fails to invest company resources according to "prudent business judgment"
  • Discloses company trade secrets to a competing business
  • Commingles the business’ money with their own personal accounts
  • Any other breach of fiduciary duty

Of course, financial advisors cannot know every single detail about future events or market conditions; however, they are expect to exercise a reasonable amount of foresight when helping create and implement business plans for a particular organization. Many financial advisors may actually work internally for the same company they are advising. Such in-house counselors are required to comply with the same types of professional and ethical standards for financial advising.

What are Some Remedies Involved in a Financial Planning Lawsuit?

Depending on the type of dispute or violation involved, financial planning lawsuits can result in various legal remedies. Misconduct by financial planners can result in:

  • A monetary damages award to the plaintiff to make up for losses caused by the misconduct
  • A replacement of the financial advisor with a different advisor
  • A loss or suspension of the advisor’s operating license

Lastly, if the violation is due to a company-wide policy, the court may require the company to readjust their company practices so that they conform to state and federal business law guidelines.

Do I Need a Lawyer for Help with a Financial Planning Lawsuit?

Lawsuits over financial matters can often be very complex. They may involve some complicated legal concepts, and so it’s in your best interest to hire a business lawyer for help. Your attorney can provide you with the legal guidance and advice that is necessary to succeed in court. Also, your attorney can be on hand to provide you with representation during the court meetings.

Photo of page author Jose Rivera

, LegalMatch Legal Writer

Last Modified: 05-29-2018 10:05 PM PDT

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