Do you have an investment account at a brokerage firm? What kind of professional handles that account? Maybe you have a “financial adviser” or a “wealth manager” or an “investment consultant” or an “account executive” or someone with a similarly high-sounding title. But here’s the truth.
If your purported adviser/manager/consultant/executive is employed by a brokerage firm and is selling you investments, what you’ve got is a plain old stockbroker. Brokerage firms can call their employees whatever they like. But take it from us; a stockbroker by any other name will smell no sweeter and advise you no better.
Brokers Make Mistakes, A Lot
The truth is that most stockbrokers are no more likely to invest your money profitably than you are. In fact, there are times when your stockbroker may not even understand what he or she is selling. That’s a problem because the more complicated a product is, the more likely it is to pay the broker a high commission but the less likely it is that the broker truly understands how the investment works or the risks and detriments of owning it.
Obviously, your broker would probably prefer that you make money so you’ll remain happy and keep trading. But don’t have any illusions about this person purporting to advise you. Your broker’s primary goal in selling you investment products isn’t to make you richer. Your broker’s primary goal is make himself or herself richer. Thus, you should always remember that “success” is a relative concept in a broker-customer relationship. To you, success means you bought or sold an investment and earned a profit. To your broker, success means you bought or sold an investment, period. You may win or lose when your broker buys or sells something in your account, but your broker will always win.
Brokers Win When They Buy and Sell
Since stockbrokers win whenever they buy or sell for you, some of them will engage in sales abuses that put your portfolio at risk. An incompetent or unethical stockbroker can easily wipe out your savings and might even destroy the lives of hundreds of customers. For that reason, your broker’s sales practices are highly regulated. Except in the case of retirement accounts like IRAs and 401k plans (which recently became subject to a more stringent duty of care), stockbrokers are only allowed to recommend stuff that’s suitable for you based on your age, income, assets, risk tolerance, expenses, and other financial circumstances. But what’s suitable for you doesn’t have to be what’s best for you – not by a longshot. Even worse, the suitability requirement is ignored every day by many brokers. Some stockbrokers don’t care what’s suitable for you and will sell you garbage if it makes them a lot of money.
Products with High Commissions and Fees
In fact, since certain kinds of investment products produce higher commissions and fees than others, your broker may be recommending investments you definitely shouldn’t own. That means lots of people have ticking time bombs in their portfolios and don’t suspect a thing. No doubt the long rising stock market we’ve been experiencing has been hiding a lot of very risky investments in people’s accounts. But all markets fall eventually, and when this one does, these hidden bombs will detonate, leaving untold numbers of shocked victims to face the financial carnage.
If we seem to have a rather jaundiced view of stockbrokers and a dubious attitude about the benefits they claim to provide, it’s because we do. We provide legal help every day to victims of stockbroker fraud and malpractice and we see the suffering firsthand. Of course, we can’t say that every broker is incompetent or unethical; there certainly are well-intentioned brokers who do their best for customers and follow the rules. In fact, some of these good brokers even send their new customers to us when they see that a prior bad broker has devastated their customer’s account. But there are so many bad brokers and so many victims that we can’t avoid feeling a bit of righteous indignation toward the brokerage industry and stockbrokers.
Skeptical of Your Broker? Talk to Us
Maybe what we’ve discussed above isn’t new to you. Perhaps you’ve suffered losses you didn’t expect or losses you were told would not occur. If so, be skeptical and talk to us. Maybe your broker said something like, “Your losses were caused by the market; everyone lost money?” Don’t believe it; talk to us. Don’t hesitate, don’t be embarrassed, and don’t assume you were at fault. If the broker’s explanation for poor account performance sounds even remotely questionable, talk to us. In fact, if you suffered serious losses for unknown reasons and just wonder whether they may have been the fault of the broker, ask us. We’ll give you answers and we’ll generally give you those answers for free. If we think you have a valid claim, we’ll tell you how we can help you with a contingent fee arrangement. Our fee will only be a percentage of what you recover; if there is no recovery, there will be no fee.
Doing nothing shouldn’t be an option. Nothing good can happen if you do nothing. Call Hugh Berkson in Cleveland at (216) 696-1422 or toll free at (866) 932-1295 for a free evaluation of your recovery options. You can also email us at email@example.com or reach us by filling out the form to the right.
Hugh Berkson is a Securities Attorney with McCarthy, Lebit, Crystal & Liffman, Co. LPA. Hugh is rated AV® Preeminent™ by Martindale-Hubbell®.
He obtained a business degree in Finance from the University of Texas at Austin in 1989, and is a 1994 graduate of Case Western Reserve University School of Law, where he was a member of the Order of the Barristers and received both the American Jurisprudence Award, (National Mock Trial) in 1993 and the Jonathan M. Ault Mock Trial Prize for 1993-1994.