Financial advisors have a legal obligation to act in the best interests of their clients. A financial advisor is a professional who provides guidance and advice on various financial matters. Their role is to help clients achieve their financial goals and navigate through complex financial decisions. Financial advisors may be registered representatives of brokerage firms, investment advisers, or insurance agents. While suitability is important, fiduciary duty represents a higher standard of care.
How to Sue Your Financial Advisor or Stockbroker Over Investment Losses
If you invested in any of these products, there is a good chance you can sue your financial advisor. Depending on the type of financial advisor you have, you may need to bring your claims in FINRA arbitration rather than going to court. Taking prompt action within the applicable statute of limitations will help protect your rights and maximize your chances of obtaining a favorable outcome. Negligence is another form of breach where the advisor fails to exercise reasonable care, skill, and diligence in their duties. Negligence can manifest in various ways, such as failing to monitor a client’s investments, failing to implement appropriate risk management strategies, or failing to provide timely updates or reports. Ultimately, the role of a financial advisor is to provide comprehensive financial guidance and help clients make well-informed decisions.
Furthermore, the less of a case the firm has, the more incentive it has to resort to obfuscation. The other side can and will run up massive legal fees, and if you back out part way you may well owe them a frightening amount of money if your contract contains a loser-pays-all-costs clause. The theory is that judges are infallible and if you lose, you were in the wrong, deserve no damages, and should, therefore, pay the costs of the other side.
Likewise, if you have legal insurance that will cover most of the cost, you can proceed more easily. It is also sometimes possible to get “after-the-fact insurance,” which is not cheap, but it does mean your potential losses have a ceiling. FINRA does not have an appeals process for challenging an arbitration award.
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- Before proceeding, it’s important to note that the information presented here is intended for educational purposes only and should not be considered legal advice.
- While every situation is unique, it is important to understand the legal aspects and factors involved in determining whether a lawsuit is warranted.
- Thus, the brokerage’s alleged financial mismanagement is often not dealt with.
- If you invested in any of these products, there is a good chance you can sue your financial advisor.
- “A straightforward conversation outlining your decision to move on and clarifying if there are any open items should be enough.”
- Unfortunately, sometimes the losses are the stockbroker’s fault and your investments will not recover when the market gets better.
For over 45 years, Robert has fought for investors who fell prey to negligent financial advice. Robert and his team have extensive experience holding brokers and financial advisors liable for misconduct and negligence in Florida and across the United States. If your financial advisor gave you bad investment advice, review the advice and its impact on your financial situation. You may consider discussing your concerns with the advisor to understand their perspective. This holds true for investments that squarely meet an investor’s objectives and risk tolerance too.
Types of Financial Advisor Misconduct
You might be the victim of financial advisor fraud, misconduct, or negligence. FINRA, or the Financial Industry Regulatory Authority, is the forum in which most brokerage firms require customers to arbitrate. There is a can i sue my financial advisor panel of three arbitrators that act as judge and jury, by listening to opening and closing statements and witness testimony with direct and cross examinations. The main differences between arbitration and a court proceeding are that FINRA arbitrations are generally shorter and less expensive than court and there is no traditional appeal process.
- Investments that are illiquid—meaning there is not a strong public market for them so there are not enough potential buyers to make selling easy—are often a bad fit for investors.
- This fiduciary duty is a heightened standard of care that requires the advisor to act with undivided loyalty and utmost good faith.
- In many or most cases, the broker will deny absolutely everything with arguments that will make your blood either boil or freeze.
- It is also common for the other side to try and avoid the real issues and merits of the case from ever being discussed.
- While market losses are part of investing, unethical conduct should never be tolerated.
Why You Need an Experienced Investors’ Rights Attorney to Sue Your Financial Advisor for Losses
Litigation, on the other hand, involves resolving disputes in court and is more formal and rigid due to strict procedural rules. While this method can be more costly and time-consuming, it provides a public record of proceedings and the potential for appealing unfavorable decisions, which might influence future cases. In my many years of experience, Bob is as good or better than anyone I have ever worked with and always gives every case his maximum best effort. In arbitration, when the pressure is on, Bob is always calm and prepared to and consistently crafts a winning strategy. If you are lucky enough to be referred to Bob, I wouldn’t look any further. You will have the option to file a case in court if there is no binding arbitration clause in your brokerage agreement.
The SEC’s anti-fraud provisions also prohibit deceptive practices in securities markets. Investment advisors are also bound by fiduciary duties to place the client’s best interests ahead of their own and to reduce or eliminate conflicts. Violations of these regulations can lead to disciplinary actions, lawsuits and some cases, criminal charges. Not all financial advisors or brokerage firms owe the same legal duties to their clients. You must consult your investment loss recovery attorney for advice if your investment broker or advisor is a registered investment adviser.
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An in-depth review of your financial situation quarterly, at least, will ensure that you spot any irregularities in your account. You could lose valuable evidence if you wait too long to protect your rights. Thus, you must review your portfolio with a seasoned investment loss recovery attorney right away if you notice something amiss.
Financial advisors stay up-to-date with market trends and regulatory changes to ensure their clients’ financial plans remain relevant and effective. Financial advisors also act as educators, helping clients understand complex financial concepts and strategies. They provide clarity on topics such as asset allocation, diversification, risk management, and retirement planning. By equipping clients with knowledge, financial advisors empower them to make informed decisions and take control of their financial future. In such cases, clients may wonder if they have grounds to sue their financial advisor.
They can engage in FINRA arbitration, a private, binding process tailored to resolve disputes quickly. Alternatively, investors can file regulatory complaints with the SEC regarding unethical activities or pursue civil court litigation, such as securities fraud lawsuits. These mechanisms allow investors to seek justice and compensation for financial wrongs. In many cases, investors are not eligible to file a lawsuit against their stockbroker or financial advisor. This is because most investment account agreements contain mandatory arbitration provisions that require disputes to be settled through arbitration instead of litigation.
While there are no guaranteed returns, research suggests that a financial advisor can amplify your investment returns by an average of 1.5% to 4%, depending on the time horizon and how those gains are measured. Peter Lazaroff, an Investopedia top-10 financial advisor, emphasized that modern financial advice goes beyond dealing with spreadsheets and financial information. In addition, many financial professionals are members of a charter organization (you can usually tell by the abbreviations after their name).
Stockbrokers and financial advisors are valued by investors for their sophisticated understanding of the financial industry. Unfortunately, some advisors use their knowledge to make a profit for themselves – often by deliberately going against the instructions, and best interests, of the investor. In other cases, financial planners unintentionally make careless mistakes, exposing the investor to preventable financial harm. As is the case with most legal questions, the answer is that it depends on the specifics of the situation.
Investment recommendations must align with the client’s financial objectives, risk tolerance, and personal circumstances. We fight to level the playing field between large corporations and the public investor. Brokers and financial advisors need to understand their clients’ risk tolerance, as well as their clients’ investment needs. If you receive bad financial advice, document the advice and its impact, then seek a second opinion from another financial adviser. File a complaint with the advisory firm or a regulatory body like FINRA or the SEC if necessary.
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