Bloomberg reported this week that Fisher Investments, the firm run by Forbes magazine columnist Kenneth Fisher, lost a private arbitration proceeding and may have to pay damages of $376,075 for breaching its fiduciary duty to a retired investor.
According to Bloomberg, which was leaked a copy of the sealed decision, Sharyn Silverstein, 64,called Fisher Investments after seeing an ad for a free book. That call led to a barrage of high-pressure sales calls.
"She called Fisher to get a copy of a free book, with no intention of doing business with Fisher, and ended up being pressured and eventually persuaded, despite significant resistance on her part and that of her husband, to turn over all of her fixed-income securities to Fisher to be invested in equities," Karen Willcutts, the arbitrator for the case, wrote in an initial decision.
The Fisher investment manager assigned to Silverstein failed to take into account the fact that Silverstein and her husband needed income from their investments. That was a breach of the company's fiduciary duties, a legally enforceable standard.
"Fisher failed to make reasonable inquiry into Ms. Silverstein's financial situation, investment experience, and investment objectives or ignored that information. Instead of tailoring its recommendation to Ms. Silverstein's circumstances and needs, as it promised to do and had a duty to do, Fisher simply made the same recommendation to Ms. Silverstein that it makes to the vast majority of its clients: 100 percent equities benchmarked to the MSCI World Index," Willcutts wrote.
According to Bloomberg, Silverstein lost $376,075 of her $876,357 investment. The arbitration decision apparently orders Fisher Investments to make Silverstein whole, refunding her loss, plus attorney's fees, other expenses and interest.
There is no free book nor free anything. The price you pay for responding to a free offer from an investment sales representatove is relentless pressure to buy something else. It's not worth the aggravation. If you want what's offered for free, go to the store and buy it.
Just hang up. Remember the Fuller Brush salesman? If you let him get his foot in the door, it was almost impossible to get him to leave. The same can hold true for investment sales reps who call on the phone. If you're not interested, it's not rude to interrupt their spiel and say, "No, thanks," and hang up.
Get another opinion. Would you let a doctor cut off your leg without getting a second opinion? Of course not. By the same token, if an investment sales rep wants you to turn over all your savings to him so he can invest it differently, be very cautious. Get another opinion -- or better yet -- get two or three more opinions from people who are knowledgeable and have your best interests at heart.