Is there a cure for the financial-adviser
The lengthy stock market downturn has knocked the
stuffing out of almost everyone's portfolio, and a lot of the trust
out of the financial landscape.
Many investors who cheerfully took their broker's
or financial adviser's advice back in those heady days of the bull
market when the money was rolling in are suddenly wondering if they
were led astray, now that the profits have disappeared.
"There's always a correlation between the direction
of the stock market and how many complaints there are," says
Ken Andrichik, vice president of dispute resolution at the National
Association of Securities Dealers. "The drop in the market
has highlighted problems in accounts for investors."
Who takes responsibility?
Unfortunately, you can't blame someone else just because your portfolio
lost money. Even if you relied on a broker or adviser's advice,
you may not have a claim. But, if you believe your broker or adviser
defrauded you, you should file a complaint.
Andrichik says the most common allegations involve
misrepresentation and unsuitability. Misrepresentation is an untrue
representation or omission of facts relating to an investment. The
client believes they were told one thing and finds out later what
they believed they were told may not be the case.
Unsuitability is an investment that isn't consistent
with the customer's investment objectives. An adviser recommends
a high-risk investment for a client who has a low risk tolerance.
How to complain
What can you do if your portfolio loses money and you believe fraud
or deception played a role?
Complain, in writing, to your broker or adviser immediately.
Be very specific and send copies of documentation. If you don't
get a satisfactory response, contact management. If that doesn't
work, it's time to file a formal complaint with governing boards
or regulatory agencies.
If your complaint is against a stockbroker, you can
file with the Securities
and Exchange Commission or the NASD.
Both Web sites have a wealth of information taking you step by step
through the complaint process.
If your complaint is against a financial planner,
you can file with the SEC. If the planner is a certified financial
planner, you may also complain to the CFP
Board of Standards.
The SEC evaluates complaints, conducts investigations
and counsels investors about possible remedies. The agency also
takes legal action against individuals or firms that violate federal
The CFP board investigates complaints and presents
cases to a professional review board. The board can only enforce
the code of ethics. It may censure or suspend a CFP, or may revoke
the planner's right to use the CFP trademark. It can't stop a planner
from doing business.
The NASD investigates cases and offers mediation and
arbitration services. It has the power to take action against firms
In addition, every state has a division that handles
complaints against brokers and financial planners.
All of these avenues may involve fees. You may also
be advised to have an attorney represent you in some instances.
Of course, you can always hire an attorney from the start to get
the wheels of justice spinning in, perhaps, a faster but more costly
Before you hire
But the best route is to avoid this altogether. Before hiring a
broker or financial planner, take your time. Do some homework. Make
sure he or she knows your goals and your risk tolerance. If you're
not comfortable -- if they don't seem in tune with you -- don't
The flip side of that is if they're not comfortable
with your investment style, they shouldn't take you on as a client.
"If a client says they want to be aggressive,
I say, 'Thanks, you're better off at a different firm,'" says
Morris Armstrong of Armstrong Financial Strategies in New Milford,
Conn. "We look at what's suited for someone's risk and one
thing we don't take into account is dumb luck. Nobody likes to lose
a potential client, but you don't have to accept everybody as a
Be honest with your broker or adviser. If they suggest
an investment that you don't understand, say so.
Armstrong also advises taking good notes of meetings
and phone calls, and keeping all documentation pertaining to the
"If there's a dispute, it's 'he said, she said,'
but the person with the good records often has more credibility."
site also has helpful information on finding a planner -- questions
to ask, and your rights as a client. The site also allows you to
research individual planners to see what, if any, actions have been
brought against them.
has a "public disclosure" search engine intended to help
investors decide whether they want to do business with a particular
broker or firm.
has a similar page that allows you to check the background of brokers
The bottom line is your portfolio is your future. Don't hand it
to just anyone.
-- Posted: July 30, 2002