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Started By
Message
Metairie Financial Firm Having Suitability Issues
Posted on 8/12/19 at 10:59 am
Posted on 8/12/19 at 10:59 am
LINK
Essentially, some investors are complaining that their money was placed in investments that were not suitable for them. Some of them seem to be very complex, and of course, they have lost money.
I often see clients who give me 1099s and brokerage statements, and some of the stuff they are invested in, is super complex. These are not multi-millionaires - these are retirees that have 500K in 401K assets that are being rolled into IRAs, and the IRA are investing in all sorts of derivative notes, private placements, etc.
I ask them if they understand what they are investing in, and they say no, that's why they pay an adviser.
I feel bad for them because many times they aren't financially savvy. And look, if the investments are doing great, no one is complaining. But you have to understand what you are invested in, even if someone else is calling the shots on your behalf.
Essentially, some investors are complaining that their money was placed in investments that were not suitable for them. Some of them seem to be very complex, and of course, they have lost money.
I often see clients who give me 1099s and brokerage statements, and some of the stuff they are invested in, is super complex. These are not multi-millionaires - these are retirees that have 500K in 401K assets that are being rolled into IRAs, and the IRA are investing in all sorts of derivative notes, private placements, etc.
I ask them if they understand what they are investing in, and they say no, that's why they pay an adviser.
I feel bad for them because many times they aren't financially savvy. And look, if the investments are doing great, no one is complaining. But you have to understand what you are invested in, even if someone else is calling the shots on your behalf.
10
Posted on 8/12/19 at 11:03 am to LSUFanHouston
Cue Jack Bogle.
Posted on 8/12/19 at 11:06 am to LSUFanHouston
Did the firm have anything to gain by putting them in those risky investments or was it just carelessness by the firm?
Posted on 8/12/19 at 11:07 am to SippyCup
quote:
Did the firm have anything to gain by putting them in those risky investments or was it just carelessness by the firm?
They aren’t a fiduciary. It’s on the individual to protect themselves.
Posted on 8/12/19 at 11:10 am to LSUFanHouston
$100 says these slapdick "advisors" don't know how the investments work either.
Posted on 8/12/19 at 11:12 am to LSUFanHouston
Its pretty much posted all over the internet and in every basic investing book that you should never invest in anything you don't understand.
The firm should get into trouble but I have absolutely 0 sympathy for someone that gives their money to someone else to "manage" and allows them to invest in something they are clueless about.
The firm should get into trouble but I have absolutely 0 sympathy for someone that gives their money to someone else to "manage" and allows them to invest in something they are clueless about.
Posted on 8/12/19 at 11:16 am to LSUFanHouston
Yeah, those non-traded REIT's are a bad deal. The industry didn't figure that out until the financial crisis, but unfortunately it *still* hasn't been sorted out.
These stories really read like hit-pieces - leaving out important details like percentage of net worth invested in the REIT, when the money was invested, etc. Not saying the advisor didn't do anything wrong, but the firm should have had limits in place preventing the advisors from putting too much of any one client's net worth in a non-traded REIT, so they hold some liability too - probably why the article mentions they'll be defending it.
It really is unfortunate.
These stories really read like hit-pieces - leaving out important details like percentage of net worth invested in the REIT, when the money was invested, etc. Not saying the advisor didn't do anything wrong, but the firm should have had limits in place preventing the advisors from putting too much of any one client's net worth in a non-traded REIT, so they hold some liability too - probably why the article mentions they'll be defending it.
It really is unfortunate.
Posted on 8/12/19 at 11:17 am to iknowmorethanyou
quote:
$100 says these slapdick "advisors" don't know how the investments work either.
This. I'd bet $1000 they never read the entire prospectus.
Posted on 8/12/19 at 11:20 am to LSUFanHouston
Crap like this is exactly why practically everyone on this board loathes retail-variety so-called advisors. I get "let the buyer beware" as a general principle, but if a client is telling you he's risk averse & doesn't want to lose anything, aren't you morally/ethically obligated to steer him in that direction? I think so damn many of these jumped up salesmen are terribly unprofessional & see NO conflict in repeatedly referring their customers to shitty options.
FWIW, one of the advisors named in this article has a branch office on the side of the US highway in my little burg. I pass it regularly and am consistently amazed at the cost of the vehicles in the parking lot. Crazy expensive vehicles sit there there all day, so I assume (perhaps erroneously) they're not driven by customers.
FWIW, one of the advisors named in this article has a branch office on the side of the US highway in my little burg. I pass it regularly and am consistently amazed at the cost of the vehicles in the parking lot. Crazy expensive vehicles sit there there all day, so I assume (perhaps erroneously) they're not driven by customers.
Posted on 8/12/19 at 11:32 am to hungryone
quote:
Crap like this is exactly why practically everyone on this board loathes retail-variety so-called advisors. I get "let the buyer beware" as a general principle, but if a client is telling you he's risk averse & doesn't want to lose anything, aren't you morally/ethically obligated to steer him in that direction? I think so damn many of these jumped up salesmen are terribly unprofessional & see NO conflict in repeatedly referring their customers to shitty options.
You can thank the GOP for killing the DOL fiduciary rule in March 2018. They did it solely because Obama supported it...
LINK
Posted on 8/12/19 at 11:45 am to hungryone
Yes, I'm sure they fraudulently completed suitability documents to get the investments approved.
Posted on 8/12/19 at 2:16 pm to SippyCup
quote:
Did the firm have anything to gain by putting them in those risky investments or was it just carelessness by the firm?
Article states the advisers were getting pretty hefty commissions, possibly directly from the investments themselves. (So even if the advisers said they were fee-only, they were still getting commissions and not disclosing them).
Posted on 8/12/19 at 2:18 pm to iknowmorethanyou
quote:
$100 says these slapdick "advisors" don't know how the investments work either.
From my experience, I can say you are very likely correct.
For example, I'll have a client get put into some of these really complex "linked basket" derivatives. They will ask me the tax consequences of these investments. Some of these investments, at first, I don't understand the inner workings of them (which affect how they are taxed). So I'll call their FA and ask for an explanation, and I get a bunch of hmmms and coughs and no real information.
Posted on 8/12/19 at 2:25 pm to OleWarSkuleAlum
quote:
They aren’t a fiduciary. It’s on the individual to protect themselves.
Apparently, not no mo!
From the article --
quote:
It was only in June that the Securities and Exchange Commission, which oversees FINRA, adopted a package of rules to protect regular investors after talking about it "for nearly two decades," as SEC Chairman Jay Clayton put it. The new rules explicitly say brokers and advisers now have to work in their clients' best interest rather than their own.
At the very least, it seems that these people would have some sort of fraudulent misrepresentation claims.
I also believe that these two shysters will be out of business REALLY soon.
Posted on 8/12/19 at 3:13 pm to MMauler
quote:
I also believe that these two shysters will be out of business REALLY soon.
What's interesting to me: they appeared to target a specific type of investor--a retiree with a (relatively) modest pile of cash who had relatively low financial literacy. Looks like these were ppl who amassed the cash through 401K, while working in technical/industrial fields. IOW, precisely the sort of people who might not read every page of a prospectus.
Greed is a terrible thing.
Posted on 8/12/19 at 3:21 pm to hungryone
I have a history with one of the subject's brothers. It involves thousands of dollars and Worldcom. I did have grounds to sue, and probably should have, but I shouldered all the blame. Scarred me.
Posted on 8/12/19 at 3:55 pm to LSUFanHouston
Where was the compliance department in all of this?
They shoulder some responsibility as well as the FA.
They shoulder some responsibility as well as the FA.
Posted on 8/12/19 at 4:10 pm to yatesdog38
quote:
Where was the compliance department in all of this?
The B/D compliance department should have caught this if it is indeed what is alleged.
Posted on 8/12/19 at 4:16 pm to hungryone
Briseno -
Accardo -
I'm sorry, but these two look like complete f*cking scam artists.
I would bet that the end result of this investigation will be that these two shysters were getting huge kickbacks to put these retirees into these unstable REITs all the while insinuating to these poor saps that they were invested in AAA bonds.
Accardo -
I'm sorry, but these two look like complete f*cking scam artists.
I would bet that the end result of this investigation will be that these two shysters were getting huge kickbacks to put these retirees into these unstable REITs all the while insinuating to these poor saps that they were invested in AAA bonds.
This post was edited on 8/12/19 at 5:11 pm
Posted on 8/12/19 at 4:20 pm to MMauler
What do you mean kickbacks?
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