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It’s Not Your Fault

An Investment Advisor Speaks Up For Injured Investors And The Attorneys Who Represent Them

What does the investment community think of attorneys who represent investors?

It's clear that people who have been victims of bad investment advice need the services of qualified securities lawyers. Thousands of securities-industry disputes are resolved every year, and millions of dollars awarded to harmed investors. You might imagine that the investors' attorneys wouldn't have a lot of friends in the investment community.

Not necessarily true. Listen to one investment industry insider:

“People who have been taken advantage of have to understand that it's truly not their fault. They've been victims of bad advice. What investor attorneys do to help them is a necessary step in reestablishing financial security. I think any honest investment advisor would have to agree.”

The investment advisor we spoke with is an experienced portfolio manager managing millions of dollars. He applauds the professionals who help investors in these cases. Because he also serves as an expert witness in investor arbitration hearings, we won't use his name here. We will share his observations about investors who file complaints, and the lawyers who represent

“People who have been victims of mishandling by their brokers are unusually vulnerable,” said the advisor. “They've been taken advantage of–and yet, they often blame themselves. They think it's their fault, they should have been watching more carefully, should have reacted sooner when it looked as if they were losing money.

“The fact is, these people are never at fault. In the ten years I've followed arbitration proceedings, I've never once felt bad for a broker.”

According to this industry veteran, brokers who mishandle investments fall into two general categories.

“The first is brokers who know they're doing wrong. They're malicious, and they're criminals. They know they're stealing from their clients, and they don't care. As a percentage, this is a much smaller group–but they're out there.”

The larger group is simply uneducated or under informed about the needs of specific investors. “Especially when the market is hot, you have investment firms hiring lots of people whose job it is to
'go sell.' They don't get a good education, and they're not encouraged to think for themselves. They don't really know what individual investors need, so they don't know how to treat specific clients or respond to market cycles. They're not willfully misleading people. They just don't know.”

But ignorance doesn't relieve them of responsibility. “Just because they're not really prepared to be professional investment advisors doesn't mean they don't have fiduciary obligations to their clients,” he went on. “Mishandled investments, whether willful or accidental, really do hurt people, and these people need help.”

He offered advice to investors who are wary of being burned by bad investment advice: seek out fee-based investment services. “Time and time again, I see people who have lost lots of money. In almost every case, their investments advisors or their firms have put their own financial interests ahead of the interests of their clients.”

“A fee-based investment advisor can help investors guard against that. Since the advisor doesn't make any commissions from sales, they're free to help clients build exactly the right portfolio for their individual needs. And since advisor fees are based in part on the performance of those investments, the incentives are in the right place. Financial advisors should succeed when their clients succeed. That's how I think our industry should operate,” he said.

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