• Careful consulting as a principle
• Responsibilities of the investment consultant in principle
• Breach of contract
• Damage
• Causation

Breach of contract

Advising the client without care is legally viewed as a breach of contract.

Thereby omissions during the first conversation may even give rise to a liability: If the investment consultant did not clarify the client`s requirements carefully and did not point out risks of the chosen investment strategy or suggested a strategy which was too aggressive and likely to result in losses, this would qualify as a breach of contract.

If the investment consultant suggests the purchase of securities which do not conform to the client profile, this may qualify as a breach of contract. In the event that the parties agreed in the client profile that only capital preserving financial products are reasonable (such as bonds), any suggestions to invest in a risky structuring product qualifies as a breach of contract.

If the investment consultant is to monitor the investment constantly, a failure to monitor the investments constantly or to inform the investor about any threatening loss has to be considered as careless breach of contract which gives rise to liability. If the investment consultant becomes aware that certain investments suggested by him against all expectation will develop negatively and he fails to inform the investor accordingly, such failure may constitute a breach of contract.

Thereby it has to be considered, that not every breach of contract has to result in an injury: If the investor on the grounds of being advised to do so by his investment consultant purchases a product which is too risky and structuring but makes a profit, the investment consultant due to no harm having been done is not liable, although his suggestions did not comply with the client profile.