How Do I Know if My Broker or Financial Advisor is Taking Advantage of Me?
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
If you can prove that your financial advisor caused you to suffer financial losses by engaging in fraud or financial misconduct, you may be able to recover compensation with help from an aggressive and experienced FINRA arbitration lawyer. However, before you can file a claim or be compensated for your losses, you must learn how to recognize the warning signs that fraud has occurred (or is actively in progress). Toward that end, our FINRA arbitration law firm has prepared this article discussing some common red flags that your broker or financial advisor is mismanaging your assets or intentionally making inappropriate financial recommendations.
3 Warning Signs Your Financial Advisor or Stockbroker is Committing Fraud
Hiring a stockbroker or financial advisor to manage your money seems like a prudent financial move. However, as all too many investors find out the hard way, hiring the wrong advisor can cause more financial problems than it solves.
Unfortunately, it isn’t always easy to tell when your advisor or stockbroker is acting against your best interests, particularly if you are new to investing or simply don’t have time to keep a vigilant eye on each trade and transaction. This problem can be exacerbated by the fact that brokers are generally paid through a commission on the securities they sell for you (such as stocks and bonds), a percentage of the assets they manage for you, and/or a combination of other payment methods, which can make it difficult to keep close track of the fees you are ultimately paying.
The first step toward protecting yourself is learning how to identify some common indicators and warning signs of investment fraud and financial misconduct. These warning signs include the following:
- Pushing you to trade excessively. Advisors who are paid on a commission basis have a financial incentive to make as many transactions as possible – including those which aren’t necessarily in your best interests as a client. It may be appropriate to speak with an unauthorized trades lawyer or trade churning lawyer if you’ve found yourself in this position.
- Pushing you to buy annuities. An “annuity” is a lump sum of cash that you invest, entitling you to a series of payments. While annuities can have legitimate financial benefits under the right set of circumstances – to use one possible example, low-cost variable annuities for high earners who anticipate retiring in a lower tax bracket – they can also be risky and needless, because they tend to (1) carry large fees, while (2) generating large commissions for the advisors who sell them. If your advisor is pushing you to buy annuities without giving you a detailed explanation as to precisely how you benefit, be on high alert.
- Loading mutual funds. A “sales load” or “sales charge” is a charge associated with shares of a mutual fund (typically Class A). One common type of sales load, called a “deferred load,” frequently leads investors into financial trouble. Unlike an upfront load, a deferred load allows you to invest the full amount that you wish to commit to the mutual fund. However, if you sell the fund within a five- to seven-year period, you will receive a sales charge. If your advisor consistently pushes you toward load funds, there’s a risk that your advisor may be acting in their own best interests – not yours.
If any of these scenarios sound familiar to you, an attorney may be able to help you get your money back by filing a claim with an organization called the Financial Industry Regulatory Authority, or FINRA. Continue reading to learn more about how a FINRA lawyer can fight for compensation if your broker or financial advisor defrauded you, your spouse, or your small business.
How a FINRA Abritration Attorney Can Help if You Were a Victim of Fraud
FINRA is a private organization which regulates hundreds of thousands of individual stockbrokers, brokerage firms, and financial advisors across the United States. When an investor believes that he or she has been defrauded by his or her broker, the investor can file a claim with FINRA, which starts a legal process known as “arbitration.”
Arbitration is similar to litigation, which refers to the process of filing a lawsuit and going to trial, but is typically a faster and more cost-efficient channel for dispute resolution if securities fraud is alleged. Depending on what the FINRA arbitrator, or panel of arbitrators, decides after reviewing the evidence presented at arbitration, the investor could potentially be awarded financial compensation to reimburse his or her financial losses. An experienced FINRA arbitration attorney can facilitate this process by:
- Determining whether the investor has a claim, and if so, evaluating whether mediation, arbitration, or litigation would have the highest likelihood of resulting in a favorable outcome for the investor.
- Preparing, reviewing, and submitting a FINRA claim on behalf of the investor.
- Obtaining financial documentation and other evidence from the broker, brokerage firm, or financial advisor.
- Conducting a sophisticated financial analysis of the evidence to build a case explaining how the broker’s actions constituted fraud or negligence.
- Ensuring that the investor’s rights are properly upheld at all stages of the FINRA claims process.
- Helping the investor collect any compensation that is awarded by the arbitrator or arbitration panel.
If you think you were defrauded by your financial advisor, your stockbroker, or a brokerage firm, you are urged to review your legal options with a knowledgeable FINRA attorney as soon as possible. For a free legal consultation, contact the law offices of Epperson & Greenidge, LLP online, or contact us by phone at (877) 445-9261.