You have recourse to recover market loss if you were invested inappropriately. Fraud and mismanagement is often revealed during periods of market corrections. Like the tide receding and content of the ocean floor being revealed, an advisor’s misdeeds are no longer concealed by a strong market during such corrections.
Your financial professional is required to only recommend investments in your best interests. This includes investing you in a manner that is consistent with your tolerance for risk and investment objectives and not putting their financial interests ahead of yours.
The failure of advisors to adhere to these obligations often leads to large losses that should have been avoided.
Advisors often stray from these responsibilities because of financial incentives. Investment strategies utilizing margin or options are highly risky but often pay an advisor handsomely. Complex exchange traded funds usually pay higher commissions. Stocks pay higher commissions than bonds. Annuities, insurance and REITs pay higher commissions than stocks. While a share of stock can pay a broker 1%, annuities, REITs and insurance investments can pay a broker 7% to 15%.
If you are approaching retirement, an appropriate portfolio will often have less than 50% of the holdings in stocks, and few if any REITs, annuities or insurance investments.
Being too heavily invested in risky market sectors, such as artificial intelligence or information technology, can be inappropriate or fraudulent. Advisors have a duty to research and understand the risks of these investments. Often, advisors receive undisclosed compensation to ignore these risks.
We have helped investors recover market loss for over 20 years. Please contact us for a free initial consultation to see if you have been the victim of fraud or mismanagement.
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