You & The Law: Claims Against Your Financial Advisor (Part 2)
Last week I told you about what happened to Hal and his wife, both 67, retired, and long time readers. From more than a million dollars in their 401K account as of January, 2006, their investments have lost close to $750,000.
Why? What Went Wrong?
“In our final preparations for retirement, in early 2006 even though we stressed wanting to be ultra-conservative, our broker steered us into some of America’s largest financial institutions who failed,” Hal’s wife, Martha, told me, sobbing.
“Invest in America, invest in your country,” he always told us, showing charts at what buying stock does. When we suggested selling our investments which had gone up in value-taking some of your winnings off of the table-he said we would miss out on further stock gains. He treated us like his son, and we trusted him,” she added.
Today, they are under a doctor’s care, taking anti-depressive medications. The fact they have a $200,000 bank CD was, “my doing, over Hal’s objections, because I realized that everything we had was in stocks, and it scared me,” Martha related.
I ran my reader’s factual situation by Philadelphia Securities Lawyer Nicholas J. Guiliano, who gave me the following analysis.Investing Means Risks“Your readers suffered tremendous losses which went far beyond the acceptable risks of being an investor. Fannie Mae and Freddie Mac were not safe, conservative investments contrary to what brokers all over the country were telling their clients. In early 2004, Regulators warned too many people were being placed into home loans they could not repay. This information was published in the trade publications brokers read,” he pointed out.“Since February 2007, there was ample, credible information in the marketplace in the form of billion dollar write downs at the world’s largest financial institutions that confirmed the extent of the subprime loan crisis and ensuing financial meltdown.”
“Fannie and Freddie-among others-was a time bomb, with huge losses and write downs. The writing was on the wall at least two years back.”
“An investment advisor who has a conscience and is competent should never put clients in your reader’s situation into an incredibly risky investment such as these,” he said.
Brokers have a very high duty of care for their clients, known as a Fiduciary Duty. “The investments offered must be appropriate for their age, financial resources, risk tolerance and not because it generates a fat commission for the broker,” Mr. Guiliano stated.
“We are seeing so many cases where brokers downplayed known risk and knowingly made completely inappropriate recommendations to clients just like your readers. Given their age and present economy, they will probably never recover,” Attorney Guiliano observed.
“But what about large life insurance annuities that are now being pushed?” I asked the securities lawyer.
His Answer Gave Reason For Concern
“If you place the bulk of your retirement funds with an annuity company and it fails, you could lose most of your money, regardless of their so-called guarantees. While there are State Guarantee Associations, you would be surprised at how little is actually protected,” he pointed out.
“A good broker or financial adviser needs to carefully explain the real possibilities of what happens when a company goes bankrupt and you own its stock, or if you have purchased a large insurance annuity,” he warns.
The Need For Balance
“Investments need to be age balanced. In general the younger you are, more risk can be assumed, but when you are getting close to retirement, common sense dictates less risk and more cash. This means bank CD’s and US Government Full Faith and Credit investments.”
“Losing money goes hand-in-hand with being in the stock market. If your broker’s recommendations were consistent with what you understood and wanted, there is very little basis for a claim, he was quick to point out.
“67-years old, retired and most assets in stock is simply inappropriate, actionable and your readers should have this potential claim evaluated by a lawyer who has particular experience in securities arbitration,” he firmly maintains.
For any reader interested, there is an association of The Public Investors Arbitration Bar Association at: www.piaba.org
Finally, Mr. Guiliano opened one additional door where innocent employees have lost much of their employer sponsored pension and profit sharing retirement accounts.
“Lawyers in my field are expecting to see another casualty of the stock market crash: employer managed office retirement accounts. Where the boss managed employees’ retirement money in high risk ways-and suffered huge losses-this will hurt employees deeply and lead to suits alleging mismanagement,” he feels.
But that is a story to be written another day.
Guiliano Law Group
Our practice is limited to the representation of investors in claims, for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.