Suppose you hire a financial advisor and invest money. One day your statement comes in the mail and you suffered a staggering loss. Do you have any recourse against your broker? Naturally, the answer depends upon circumstances. I'll use a couple of different scenarios to illustrate.
In 2008, a retiree from Kodak brings an advisor a million-dollar IRA to manage, needing to withdraw $4,000 per month. After a thorough analysis of the client’s needs, the advisor puts together well-balanced portfolio with the client’s permission and starts a monthly distribution. About that time, the market goes into a year-long tailspin and the retiree is shocked see his million-dollar portfolio at $850,000. Compare that to Mrs. Smith, age 78, who has only ever invested in savings accounts and CDs. Disgusted by low rates she agrees to meet the banks investment person who puts all her money into a high yield bond mutual fund. Her understanding is that it’s paying 6% interest, but is shocked when her $100,000 turns into $85,000.
In this overly simplistic example, Mrs. Smith has far more reason to file a complaint, even though the loss is 10 times greater for the retiree. Why? Because a junk bond mutual fund is not suitable as the sole investment for a 78 year old with no prior investment experience. On the other hand, a retiree who has 40 years’ experience investing in a 401k and gives permission to go ahead with an acceptable strategy after full disclosure has only been damaged by the market – which of course carries no guarantees. The good news is that most people have fully recovered from the latest meltdown.
Which is the point of this commentary- just because you suffer a loss doesn’t mean you’ve been wronged. The size of the loss does not matter either. What matters is that investments are suitable for your particular situation. Your advisor must disclose all of the risks. Unless you have given discretionary authority, you must approve every transaction within your account. The advice you receive should be sound, and trading - as well as fees for it - should not be excessive. If you suffer a loss for any of these reasons, your next step would be arbitration.
Whenever you open a brokerage account, in the fine print you agree to settle any disputes through arbitration. You can represent yourself, but I highly recommend using an attorney. After quantifying your losses, a panel assembled by FINRA hears your case and awards or denies damages. At this point both representatives and the firm that employs them can be held responsible. Not all losses are created equal, but if yours is caused by an incompetent or predatory advisor, you do have a method for recovery.
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Mark joined WHAM in January of 1998 when his weekly call in financial show "Money and More" first aired. The show ran for eleven years and became one of the stations highest rated programs. Recently Mark has returned to provide daily commentary and analysis on the WHAM afternoon news. His segment can be heard at 4:26pm Monday through Friday, with an extended appearance with Randy Gorbman on Thursdays.
Mark started his financial services career in 1986 with IDS/American Express. He is a Certified Fund Specialist and Certified Long Term Care Specialist with a Bachelor's Degree in Economics and Management from SUNY Geneseo. He has designed, authored, and presented retirement and long term care workshops for clients, corporations, and non-profit organizations such as Xerox, Kodak, Agway, and the United Way.
In 2007, Registered Rep magazine listed Mark among the Top 100 Independent Advisors in the country. He lives in Geneseo with his wife Susan and has four children. Mark is an avid fisherman and enjoys spending time at his family cottage in the Thousand Islands. Mark also collects Civil War and Underground Railroad memorabilia for a museum he keeps in the basement of the historic Henrietta office.
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As professionals skilled in retirement planning, the partners of The Horizon Group have helped hundreds of people in the Rochester area since our founding in 1993. We specialize in helping clients invest and protect their retirement assets with a straightforward and down-to-earth approach through open and honest communication.
We are proud of being able to help clients make difficult decisions necessary for a successful retirement. We are dedicated to the highest level of professionalism and ethical standards in our practice, and we honor the individual circumstances facing each client.
When faced with providing income and security for a lifetime, retirees are comforted by our "Bucket Approach" and half-century of combined experience. Our formalized review process and frequent communication through newsletters, e-mail, and seminars provide our clients with peace of mind and keeps them focused on what is truly important.
Working with The Horizon Group affords our clients a level of service and unbiased advice that can be delivered only by a small independent practice. At the same time, our client accounts are offered the same FINRA and SIPC protections through our broker-dealer, Cadaret, Grant & Co., Inc., as they would be at a large brokerage house.
We take the time to understand all the questions and concerns our clients have about the future. Aiding them in dealing with these concerns often means going above and beyond the duties of the average financial planner, something we are always willing to do. Helping a child, buying a second home, or dealing with long term care are all issues we assist clients with regularly. At The Horizon Group, we know it's about the quality of your life, not just your portfolio.
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The views expressed in Mark's commentaries are to be considered for informational and entertainment purposes only. Before making decisions based on any content in Mark's commentaries you should always consult your financial or tax professional.
The views expressed herein do not necessarily reflect those of this station or of Clear Channel Communications, Inc.
Mark Congdon is a registered representative of Cadaret, Grant & Co., Inc., Member FINRA/SIPC.
