Financial adviser presumed to be advising

Clients using a financial private client adviser are entitled to assume he is advising them unless he makes it clear that he is merely providing information to enable the client to make his own mind up, according to a court ruling.

A client took HSBC to court on grounds his HSBC private client advisor had advised him to invest in a particular fund. The bank claimed the adviser had merely given the client information, so he could make his own decision whether to invest or not. The adviser had then simply carried out his instructions – the adviser had invested in the fund for him on an ‘execution only’ basis.

The court said that:

“…most private clients, if they understood the significance of the distinction at all, would say that they expected their relationship with a financial adviser to be an advisory one. In the circumstances, there can be no default presumption that the contract is “execution only”

This means that it is up to the adviser to make it clear if he is acting on an execution only basis – otherwise he will be presumed to be giving advice.


Those using private client advisers should ensure both they and their adviser are absolutely clear whether the adviser is, in fact, giving the client advice in relation to investments and transactions, or merely providing information on the basis that the client will evaluate it, come to their own conclusions and, if the client decides to invest or sell, give the adviser an ‘execution only’ instruction.