Whos watching out for your interests, as an investor? If a car maker produces faulty brakes or a toy turns out to be a choking hazard, there are government agencies and commissions to protect the consumer. But when investors need justice, where do they turn? The answer may surprise you. Guarding Your Wealth" is a nationally syndicated weekly personal finance column written by Jeffrey D. Voudrie, CFP. Mr. Voudrie is the President of a private wealth management firm that employs sophisticated proprietary strategies designed to protect and grow its clients' investments. Please visit our website, Guardingyourwealth.com to read past articles in our archive.
(PRWEB) March 29, 2005 -- Whos watching out for your interests, as an investor? If a car maker produces faulty brakes or a toy turns out to be a choking hazard, there are government agencies and commissions to protect the consumer. But when investors need justice, where do they turn? The answer may surprise you.
There is recourse for investors who have been subject to outright fraud. What about investors who lose much of their lifes savings because of their advisors inaction? Heres a true-life example. ‘Bob retires in 2000 and entrusts an advisor with his $750,000 retirement nest egg. The advisor assures Bob that he will watch and take action when needed. Three years later, Bobs account is only worth $350,000 because his advisor failed to act. What recourse does Bob have?
It used to be that investors could turn to the courts. Not any more. In 1987, the Supreme Court ruled that investors can be required to waive their right to sue in court in order to open a brokerage account. Many of the arbitration judges are industry insiders and even though 55% of the rulings have been in favor of investors, the awards are usually just a fraction of the actual loss. No wonder Wall Street firms prefer arbitration!
Not all advisors operate under the same oversight or standards. Stockbrokers are federally regulated by the SEC and NASD while insurance agents are regulated by their state insurance commission. When it comes to making investment recommendations, both of these advisors operate under the ‘suitability standard. This basically means that advice they offer has to be suitable for the investor.
Unfortunately, this definition is a very broad one, and as long as they get you to sign the right paperwork, it doesnt matter if the investment is really suitable for you or not. Theyre off the hook. Bob (like all investors) signed paperwork not realizing that he was virtually relieving the advisor of any responsibility for his actions.
Registered Investment Advisors (like myself) are regulated by the SEC or the states depending on how much money they manage. Regardless, we operate under a much higher standard, called ‘fiduciary responsibility. We are legally bound to do what is in your best interest, even if its not in our own. There is a move to make all financial advisors subject to the fiduciary standard, but Wall Street firms are fighting it tooth and nail.
Here is what you must do to protect your money. First and foremost, choose an advisor with fiduciary responsibility. If an advisor gets paid by commission or the investment is an insurance based product, that advisor is NOT held to the fiduciary standard.
Second, dont ever rush to make an investment decision. No matter what your advisor may tell you, theres NO need to make a decision that day. Thats just a sales tactic to pressure you to act before you change your mind or go choose another advisor!
Dont feel pressured even when you have a deadline such as rolling over a retirement account. You can temporarily park your funds in an IRA money market account and take your time making the decision thats best for you.
Third, NEVER sign anything you havent read and understood. Forcing nervous investors to quickly sign confusing paperwork is what gets advisors off the hook for their actions. Take your unsigned paperwork with you and read it carefully. Take it to someone who has nothing to gain, such as an attorney or a Certified Financial Planner you pay by the hour. If youre investing your lifes savings, isnt it worth taking the time and small expense to make sure youre doing the right thing?
The bottom line? Investor beware. The responsibility of looking out for your interests lies on your shoulders. If youd like a little help with that job, send me an email. But always be skeptical. Do your own research.
Im happy to help as I can. Email me at jeff@guardingyourwealth.com. Im in the enviable position of not having to garner new clients and Id be glad to give you my unbiased opinion.
Read answers to questions other readers have asked on the Q&A page at www.guardingyourwealth.com.
In addition to being a nationally syndicated columnist and Certified Financial Planning Practitioner, Mr. Voudrie serves clients nationwide using a proprietary money management system he's personally developed.
Looking for an energetic expert who is passionate about financial and wealth management? Mr. Voudrie is an excellent speaker who will excite and inspire your audience. Mr. Voudrie is available for a limited number of speaking engagements, television appearances and radio talk shows. For booking information, email jeff@guardingyourwealth.com.
Related Articles can be found at www.guardingyourwealth.com under the Guarding Your Wealth Article Archive:
Sneaky Suspicions About Your Advisor?
Seniors Targets for Financial Charlatans
Knowing When Youre Financially Vulnerable
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