Failed capital investment – Compensation for flawed investment advice

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A lot of investors have experienced a crash landing when it comes to their financial investments. If
the bank gave flawed investment advice, it is possible to assert claims for damages.

During periods of persistently low interest rates, many people search for suitable capital investment
opportunities. However, a lot of investors also have past experiences where
their investment flopped and they lost money as a result. But in many cases the
money is not lost for good. We at the commercial law firm MTR Rechtsanwälte
note that if the investment advice was flawed, it is possible to assert claims
for damages.

When deciding to make a capital investment, a lot of consumers rely on the expert advice of a bank.
Just as in the case of independent investment consultants, the advice given by
bank advisors must be investor and investment specific.

This means that when making investment recommendations, the advisor needs to account for the
financial situation, his or her client’s investment experience as well as
investment goals, and, above all, their appetite for risk. In short: the
investment must fit the investor; a highly speculative capital investment is
generally not suitable for investors looking to, for instance, make a safe
investment as part of their retirement planning.

Moreover, the advisor needs
to provide detailed information about how the financial investment works and
the associated risks. The consumer must receive all the information that is of
material importance to his or her investment decision.

The bank advisor also needs to provide information about any additional costs and high brokerage
commissions or kickbacks. This obligation to inform is designed to expose
potential conflicts between the bank’s interest in receiving commission and its
client’s investment goals before the latter decides to commit to a capital

Experience shows again and again that investment advice does not meet these high standards and fails,
for example, to sufficiently inform investors about the risks involved, or the
advisor withholds information from them about the high brokerage commissions the
advisor or consultancy will receive. If the bank advisor fails to fulfill his
or her obligation to inform, it is possible to assert claims for damages. That
being said, it needs to be demonstrated on a case-by-case basis that the
investment advice was flawed. Lawyers with experience in the field of banking
law can offer advice.

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