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UpstairsComputer
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re: Metairie Financial Firm Having Suitability Issues
Well my feelings are certainly hurt.

OP, I do apologize for my role in hijacking your post.


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saderade
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re: Metairie Financial Firm Having Suitability Issues
quote:

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.
You think maybe the advisors were dishonest about where the money was going, considering that over 30 people are suing them?
And while I agree with your point about doing your own research, these people obviously weren’t financially savvy and thought they could trust the advisors. When you are paying someone for professional services, you expect a certain level of competence and that they have their your best interest in mind. This goes for CPA, lawyers, engineers, doctors etc.
Edited
This post was edited on 8/13 at 10:01 am


Janky
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re: Metairie Financial Firm Having Suitability Issues
quote:

You think maybe the investors were dishonest about where the money was going,


I assume you meant advisors.

I see it all the time. The client just signs and doesn't ask questions. When I start to explain what they are signing I get stopped. Same goes for when I try to explain some of the holdings in the account. They tell me they don't care and that they trust me.


LSURussian
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re: Metairie Financial Firm Having Suitability Issues
quote:

and that they trust me.




Janky
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re: Metairie Financial Firm Having Suitability Issues
Maybe.


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hungryone
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re: Metairie Financial Firm Having Suitability Issues
quote:

I see it all the time. The client just signs and doesn't ask questions. When I start to explain what they are signing I get stopped. Same goes for when I try to explain some of the holdings in the account. They tell me they don't care and that they trust me.

Exactly the point: if the client says he wants to preserve funds & has low risk tolerance, you are thereby morally obligated to provide him with a low risk option. Not stick a high-risk, obscure option in front of him and then claim "but he didn't read it" as an excuse.

Note I didn't say legal, I said MORAL. If you know that you've earned a person's trust and you ignore their express wishes in order to chase profits, you have no integrity. It is a moral failing on your part. Yes, the client did not act with the skepticism and wariness all good consumers should employ, but then again, the salesperson should not say one thing (this is low risk!) and then present an opportunity that is exactly the opposite (the REITs mentioned upthread, for example).

See, many people assume that retail-type FAs actually know what they're doing....when they SHOULD assume they're no better than used car salesman.


Janky
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re: Metairie Financial Firm Having Suitability Issues
I don't disagree one bit. I am just relaying what I see. It is the responsibility of the advisor to act morally and ethically. Some do and some don't just like in all professions.


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UpstairsComputer
LSU Fan
Prairieville
Member since Jan 2017
577 posts

re: Metairie Financial Firm Having Suitability Issues
quote:

many people assume that retail-type FAs actually know what they're doing..


This. I'm certainly not saying this makes it right, but they could have very well checked every box that makes them "compliant" and still unintentionally screw the client by putting them in a bad investment - with a dash of conflict of interest for the 7% payout.

Before the GFC, REITs were gold... consistent high dividends, capital appreciation, great commission, etc. Little did everyone know they would all stop their dividends, reduce their NAV, close redemptions, and never actually have a liquidating event, all while providing zero useful updates to the advisors or clients.

I'm sure these guys regret not knowing this could happen (what's too good to be true...). And they may settle, but I doubt they meant to harm people. Being an "advisor" doesn't mean all your recommendations work.

*fine print - I'm not defending anyone


jbgleason
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re: Metairie Financial Firm Having Suitability Issues
Aside from the financial aspects, which I am not qualified to comment upon, this seems like a pretty clear case of an "Advisor" preying on a specific type of victim.

I am a big personal responsibility person and believe, for instance, that people taking an interest only mortgage on a $500,000 house when they are making $65k a year are the ones responsible. After all, that it clearly a bad idea. You don't need to be a CPA to see the numbers on that.

This, on the other hand, involves what seems to be shady sales people touting highly complicated (I didn't even know what a REIT was before this thing came about) investments to a client base (elderly and from blue collar type backgrounds) who seem ready made to be suckered. Not to mention that this targeted client base was CLEARLY not good candidates for this type of investment.

So my question would be, is it the opinion of educated money managers that these guys were suckering their clients and hiding behind a "barely legal" framework? Or was what they were doing above board and the blame lies on the clients who didn't read every prospectus and agreement?

What is the likely outcome of this case? Will these guys be in trouble or will they go lie on a beach with their gains for a few years and then reappear under a different company name? I haven't seen anything that looks like this is a jail time type offense so I am guessing this will all stay in civil court?


Janky
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re: Metairie Financial Firm Having Suitability Issues
quote:

So my question would be, is it the opinion of educated money managers that these guys were suckering their clients and hiding behind a "barely legal" framework? Or was what they were doing above board and the blame lies on the clients who didn't read every prospectus and agreement?


From what is in the article I would say for the most part number one with a small element of number 2.

quote:

What is the likely outcome of this case? Will these guys be in trouble or will they go lie on a beach with their gains for a few years and then reappear under a different company name? I haven't seen anything that looks like this is a jail time type offense so I am guessing this will all stay in civil court?


It doesn't go to civil court. It will go to arbitration if it gets that far. The advisors will probably be found in the wrong. These are just my guesses.
This post was edited on 8/13 at 1:04 pm


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UpstairsComputer
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Prairieville
Member since Jan 2017
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re: Metairie Financial Firm Having Suitability Issues
This is apparently what I'm doing such a poor job getting across... There are nuances to the case that haven't been explained in the article and it was written to get clicks and make people mad (and no I don't know anyone involved)...
quote:

this seems like a pretty clear case of an "Advisor" preying on a specific type of victim

It may not be "preying", these advisors could just have gotten duped by the REIT companies (there are a bunch of them that did the same thing) when THEY changed the rules. I have a high degree of confidence had they known then what they know now, they wouldn't have sold these. I could list 20 or so really nice, smart, well intentioned, God fearing advisors who got screwed by these companies (I won't, but I could, and some are probably reading this). Any other advisors watching this thread care to agree with this point?
quote:

this targeted client base was CLEARLY not good candidates for this type of investment.


Again, the article is a hit piece. Would you feel differently if the article explained the clients wanted income so the advisors put 5% of each portfolio in this investment that paid a 6% dividend, had a great, seemingly conservative, historical track record, and it turned out to be a bad investment? It's not likely this is where they limited exposure, but when I worked at a Broker/Dealer firm, there was a limit based on risk tolerance. In addition, there was a minimum Net Worth & Income requirement. I don't remember the exacts but it was something like 10% if you were moderate, 15% for moderately aggressive, 20% max under any circumstances. And before everything went to hell, 10% in an account paying a 6-7% dividend consistently with capital appreciation for 15 years prior to the GFC seemed like a good deal. Advisors back me up?

quote:

is it the opinion of educated money managers that these guys were suckering their clients and hiding behind a "barely legal" framework?


Assuming they did it within the framework outlined above (within the rules) and provided proper disclosure, it's not barely legal, it's explicitly approved by FINRA and the SEC prior to being put on a platform to sell. IF they did everything 100% compliantly, they may get off with just ruined reputations. If not, they're going to owe a lot of money and potentially lose their licenses in the settlement.

---
This case is a great example of why if you ever decide to work with an advisor, you should work with a fee only advisor. Whether they did this right or wrong will be discovered in time, but what can't be ignored - and what has all of you so upset - is the CLEAR conflict of interest that comes with products that pay 7%+ commissions on money invested. I can't think of one product that pays that high of a commission that doesn't lock your money up for such a long time that the realities of a changing economic situation couldn't screw you in the end.


bstew3006
LSU Fan
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Member since Dec 2007
4265 posts

re: Metairie Financial Firm Having Suitability Issues
quote:

is case is a great example of why if you ever decide to work with an advisor, you should work with a fee only advisor.


The individuals listed are Fee base advisors, correct?

All the other advisors being investigated, that I’ve seen that aren’t mentioned, and there are plenty being investigated are all fee base advisors. Do you think “fee only” advisors don’t utilize Reits and other commission products?

quote:

and what has all of you so upset - is the CLEAR conflict of interest that comes with products that pay 7%+ commissions on money invested.


I’m unaware of any product that pays 7%+ commissions on money invested.

Think most people would be surprised that fee advisors aren’t just charging them a set fee of 1.4% and are double/triple dipping off other “fees” and commission products. Also, people on here get to worked up about someone making a commission.
This post was edited on 8/14 at 6:27 am


Janky
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re: Metairie Financial Firm Having Suitability Issues
Well, you can’t offer commission products as a fee based advisor regulated by the SEC. A fee based advisor operates as a RIA. Commission based products are offered through a B/D regulated by FINRA. Some outfits (LPL) are hybrids and operate as both. However, you are supposed to disclose in which capacity you are working under to the client. Does this make sense?

As for the 7%. If you are talking about managed money/fee based you are correct. Non-traded REITs pay or at least used pay 7%. Some VA’s also pay 7% and I would consider that money as “invested.” I think it was the Campbell & Company managed futures product that paid up with a 2% trail.
This post was edited on 8/14 at 6:53 am


bstew3006
LSU Fan
318
Member since Dec 2007
4265 posts

re: Metairie Financial Firm Having Suitability Issues
quote:

Some VA’s also pay 7%


VA paying 7%? Gah Damn

I’ve seen 4% then that was reduced to 3% with .15-.25 trails after DOL ruling.


Janky
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re: Metairie Financial Firm Having Suitability Issues
They were a few years ago. I haven’t sold one in over 5 years. Some 6-7 year FIA’s pay 5-6%.


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Thib-a-doe Tiger
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re: Metairie Financial Firm Having Suitability Issues
While I’m pretty sure these guys were swindling their clients, the man mentioned in the article brought up a point many people don’t understand


If you don’t have a gigantic nest egg, the chances of your principal declining throughout your life are almost 100% as you begin to withdraw from it. But that’s the entire point of saving it, so it’s there when you need it


I’m sure his issue is a combo of withdrawals and shitty performance of a bad investment


If someone tells you that you can draw 4-5% safely without depleting your funds, run



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greenwave
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re: Metairie Financial Firm Having Suitability Issues
quote:

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.


"Many of the claimants, like Donald Diggs, worked for AT&T and met the brokers at an event organized through their former employer."

This does make me feel bad for them.


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JDMMonroeTiger
LSU Fan
Monroe
Member since Dec 2009
125 posts

re: Metairie Financial Firm Having Suitability Issues
There’s a broker here in Monroe facing the same issue.

I can’t believe there was someone on here defending Obama’s DOL fiduciary regulations. That was a clear example of government not understanding what they are trying to regulate. Instead of protecting the people who need protecting, this was going to raise the cost of investing on everyone. It’s why a lot of big brokerage firms (Merrill Lynch, Edward Jones etc...) supported it. Lawyers too. Thank goodness the GOP understood this and killed that BS! If the govt would focus on brokers like the ones in the OP (every other broker in town knows who they are) who sell mostly annuities or “alternative” investments to non high net worth investors, a lot of this industry’s issues would be fixed.


wasteland
LSU Fan
Member since Apr 2011
3361 posts

re: Metairie Financial Firm Having Suitability Issues
The portfolios I've seen from this firm are loaded with variable annuities. Like 80% of the assets in VAs.


UpstairsComputer
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Member since Jan 2017
577 posts

re: Metairie Financial Firm Having Suitability Issues


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