|
E-mail this page to a friend!
Guarding Your Wealth for Senior Citizens
Arbitration Won’t Fix It: Investor Often Wins but
Gets Small Award for Damages
Over 90% of Jane’s retirement money went down the
tubes.
By Jeffrey D. Voudrie, CFP
 Jan. 16, 2008 - Some of my best article ideas come
from my readers, and this week is no exception. This is a story of
misplaced trust, dishonesty, inaction and great financial loss. The
lessons learned through their experience will hopefully save you from a
similar fate. Read on to find out more.
“Bill” and his wife, “Jane”, (not their real
names), were a well-educated couple looking to boost their returns.
After attending one broker’s seminar, Bill was impressed by “his
expertise in company analysis and stop-loss protection.”
They decided to put Jane’s retirement money into
this broker’s hands. But after signing the paperwork to open the
account, the broker never contacted Jane to find out how she wanted her
money managed. Both sides made assumptions about what the other wanted
and/or would do.
Jane and Bill were busy, and so was Jane’s IRA. We
don’t know how long it took or how the account did early on, but
eventually, over 90% of Jane’s retirement money went down the tubes.
The broker promised stop-loss protection but never
actually put that strategy in place. The broker determined Jane’s risk
tolerance without any input from her. When that section of the
application was left blank, the broker filled it in it himself so that
it, according to Bill would “justify his stock picking and mutual fund
selection.”
Bill and Jane had to go through arbitration in an
attempt to recover their losses, as are almost all brokerage firm
clients. After a process that typically takes several years, the panel
agreed that the broker had violated 26 NASD regulations.
These included
lying, the use of erroneous information, total mismanagement of clients’
accounts and the use of unsuitable investments.
When it was all over, guess who the panel found at
fault for Jane’s losses?
Jane, of course! They reasoned that since she was a
well-educated woman, with a Master’s degree no less, that she should
have known better than to let it happen.
Her husband Bill was even chastised for finding the
broker in the first place, and, “for putting her in a position to lose
her money. We were supposed to know better, not the broker, or his
broker-dealer. I am not making this up. My wife got a check for less
than 1% of the account value before the losses occurred.”
Bill’s experience with arbitration is fairly
typical. Roughly 50% of arbitration cases are won by the investor, but
the award is often a fraction of the damages. Moreover, many times the
complaint doesn’t even show on the broker’s record.
This story has many lessons. Perhaps the most
important one is that you bear the primary responsibility for managing
your investments. The financial system isn’t out to protect the
individual investor. Even if you suffer great financial loss, don’t
expect the system to bail you out.
Bill’s story also illustrates the need for
investors to have transparent communication with their advisor. If you
don’t like the investments being used or if you aren’t comfortable with
the portfolio allocation then let the advisor know.
Don’t just assume that your account is doing fine.
Watch your monthly statements. Track your portfolio’s value. If the
value starts to decline significantly and you aren’t assured the advisor
is taking action to protect it, then find out why. If you don’t like the
advisor’s response, then take your account elsewhere.
Also keep in mind that you won’t know if any
advisor is right for you until after you’ve worked with him/her for
about a year. If you find yourself laying awake at night worried about
your money, though, it’s a sure sign that something is wrong.
The bottom line: it’s better to prevent significant
losses from occurring in the first place instead of trying to recover
them through arbitration later. Determine the risk you are willing to
assume. If your account value drops to that level then demand that
action be taken. You are the boss.
The buck stops with you. You can delegate the
day-to-day management and investment selection to a trusted advisor, but
it is your responsibility to manage that relationship. Think of yourself
as a business owner. If you didn’t like the job an employee was doing
you’d fire him/her. Take the same approach with your advisor.
Remember…it’s YOUR money.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
Click to More Senior News on the
Front Page
Copyright: SeniorJournal.com |
