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How can I avoid becoming a victim of advisor misconduct and fraud? 

When you employ the services of a financial advisor, there is a certain degree of trust that you place in them. However, like it or not, you are going to find more than a few financial advisors who engage in misconduct or fraud, and you may not be so lucky as to avoid working with them. Luckily, there are ways you can avoid becoming a victim of advisor misconduct and fraud, which will be detailed here today.

Tips to avoid becoming a victim of advisor misconduct and fraud

First off, the important thing to understand is that just because your financial advisor caused you to lose money, this does not necessarily mean that they have engaged in misconduct or fraud. As unfortunate as it may be, sometimes an advisor makes a mistake, or is simply bad at their job in general. In this case, all you can really do is grumble, leave a negative review for your services, and try to recoup your losses in other ways. That being said, there are things that a financial advisor may do that should raise all the red flags and sound all the alarms.

First off, be wary of any financial advisor who is advising you with regards to investments and/or your portfolio that is too risky for you, goes against your interests, or is otherwise unsuitable for you and your needs. At best, this financial advisor is not taking into account what you want to do with your finances, as well as what you even can do. They may also attempt to get you to trade frequently in order to get more in commissions. It is better for the client’s bottom line if they trade fewer times, especially if the financial advisor is legitimately incompetent or intentional with poor financial advisement.

In the above-mentioned situations, these things can have a good-faith assumption that they simply are bad at their job. However, these below examples cannot be given such an assumption. One of these examples is where they engage in duplicitous behavior regarding prospective investments or your portfolio. If a financial advisor is being dishonest, this may result in your money going into the wrong areas, and them knowingly allowing you to make bad investments. It gets even more inappropriate when they, without consulting you in any way, decide to trade using your money without being authorized to do so.

At times, financial advisors can behave in an abjectly abusive fashion, nakedly breaking the law at your expense. One of the most common, terrible actions a financial advisor may employ is elder abuse. Elderly people are at higher risk of diminished mental faculties, meaning that some may be more susceptible to manipulation. A financial advisor may manipulate them into making decisions with their finances that are not in their best interest. Even worse, the financial advisor may attempt to trick their client into giving them more money than they are entitled to. If they are decidedly forgetful, they may even forget that this ever happened, allowing the financial advisor to take money from them frequently with lowered risk of consequence. Granted, they do not need their client to be elderly in order to find a way to skim money off the top.

How can misconduct and fraud be shown to have occurred?

It is easy to identify examples of how misconduct and fraud may manifest. Unfortunately, it is considerably more difficult to prove that these examples happened in your situation. Again, just because you lost money on an investment does not mean that the advisor was being grossly negligent or malicious in their behavior. There are ways to figure out, however, if your financial advisor’s behavior ventures into the realm of inappropriate behavior. Investigating these things may be difficult. One of the best things you can do is consult an attorney at Wolper Law Firm, who will help investigate and determine whether there is a case to be made against your financial advisor.

In order to verify potential misconduct or fraud, you must review various things. These include account statements, the agreement you have (in writing) with the firm, other written agreements, any disclosures, and any form of discussion you may have had with your financial advisor (including emails, notes, Skype, etc.). Once these things have been thoroughly investigated, if you find adequate evidence that suggests your financial advisor may be partially liable, you may have a case. The first step to take is to have your attorney contact the financial advisory firm to indicate your intent to file suit and attempt to negotiate a settlement for what you lost. If you are lucky, the financial advisor may decide to settle out of court, and for an appropriate price as well. However, it is entirely likely that they may decide that your case has no merit, and as such, will take this to court.

If this happens, your next step will be determined by prior agreements with your financial advisor. Namely, if you have a written agreement with your advisor that these matters be brought before an arbitration forum, such as the Financial Industry Regulatory Authority (FINRA). However, if no such agreement exists, it would simply be handled through court as usual. Much like other types of lawsuits, there may be a statute of limitations on how long after the initial action you can file suit. This may vary both based on which state you file suit, and through which forum you file through. If you do win your case, the next step is to figure out damages. You may claim whatever you lost, the commissions you paid, court costs, and in rarer situations, punitive damages.


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