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Make sure your investment adviser is doing what you want him to

By Jennie L. Phipps ·
Tuesday, July 13, 2010
Posted: 2 pm ET

Before you turn over your retirement savings to an investment adviser, hammer out a retirement plan that confirms the kinds of investments you are interested in making and the level of risk you are willing to take.

Fort Lauderdale, Fla., securities fraud attorney Mark A. Tepper has made a career out of representing people who believe they have been exploited by a financial adviser. Tepper says as financially strapped banks and investment firms look for more ways to make profits, they are increasingly likely to pressure clients to take undue risk. He maintains that even people who are fairly financially savvy can get caught up in the push for higher returns.

He points to a client he's representing in a claim filed with the Financial Industry Regulatory Authority, or FINRA. The claim is against Wachovia Securities, and it alleges that his client lost about 25 percent of her $100,000 retirement savings when a Wachovia financial adviser unilaterally changed her investment objectives from "Income with Moderate Risk" to "Growth and Income."

Tepper's client got into this mess when she went to the bank to open a money market IRA account. The bank employee urged her to talk to an affiliated investment adviser. What happened after that is unclear, but Tepper's complaint alleges that the adviser switched the account's goals two months after the account was opened without first getting the client's approval.

Tepper who is seeking the return of his client's money with interest, plus the costs of arbitration, an expert witness and attorney's fees, says there is one basic thing that anyone investing, particularly for retirement, should do -- document the new account.

The adviser will create a document when he opens a new account. That document will include key information, including investment objectives and the client's tolerance for risk. Both the adviser and the client sign the document. The investment firm has a duty to supervise the account to make sure the broker's recommendations are suitable for the customer's financial situation and needs, Tepper points out. If down the road, the broker and his firm stray from those objectives, a signed new account document can be the basis for demanding and getting the firm to make the client whole again, Tepper says.

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