Financial Advisor Negligence Puts Clients Financial Well-Being at Risk


Unethical and unprofessional financial advisers and stock brokers often operate under the radar, though they regularly milk clients’ brokerage accounts for extra fees and commissions, leaving respective clients with significantly less capital in their brokerage accounts.

Lawsuits in Ohio and around the United States are targeting such advisers and holding the industry accountable for illegal behavior.

Under the law, financial advisers are required to provide seniors and individual investors with independent, objective advice. On the other hand, these representatives and stock brokers are often acting as sales persons who can sell a variety of financial products.

This often creates a conflict of interest, and may tempt financial advisers to enter clients into investments that are unsuitable but profitable on a commission or fee basis.

Professional financial planners and advisors have a legal and ethical duty to senior clients an individual investors. As with any expert giving advice, financial advisers must perform their job with the skill and care expected of any competent professional.

If they fail in this regard, you may have a claim against an independent financial adviser or a bank representative handling your money and investments.

Joe Lyon is a highly-rated Cincinnati, Ohio plaintiff negligence attorney with experience representing plaintiffs nationwide in a wide variety of civil litigation and financial advisor negligence claims.


Types of Financial Advisor Negligence


•    Failure to properly execute a specific-instruction order
•    Misleading clients, and not disclosing certain fees or associated risks of an investment
•    Advising clients with information based solely on self-serving commission or fees
•    Entering clients into unsuitable, risky investments
•    Failure to understand the risks of a client’s investment
•    Providing advice on areas where they have no expertise
•    Failure to explain the implications of a particular financial product
•    Choosing one investment over another solely based on management fees
•    Offering inaccurate, incomplete or misleading investment information


Conflicts of Interest for Financial Advisors


Professional financial advisers are meant to be experts, and able to advise clients with only the client’s best interests, without any personal conflict of interest. This distinction can be muddled however, because when advisers recommend certain products it is essentially a sales pitch, and they are likely to collect fees and commissions for each transaction.

That doesn’t mean every transaction is illegal, but if an adviser is only considering his or her best interest, they may be negligent and held liable for a loss of capital.

It is very important that your adviser discuss why they are entering you into a certain investment, and moreover, prior to any transaction, discuss in detail the associated costs of the transaction.

Most stock brokers, advisors and financial planners are professional and trustworthy, but seniors and individual investors must protect themselves against occasional financial fraud and financial advisor negligence.


Financial Advisor Negligence & Unsuitable Investments


Individual investors and seniors with their money independently managed rely on the implied careful and professional judgment of a financial adviser to protect their investments. It is the responsibility of both the client and adviser to communicate investment goals, and then the responsibility of the planner to match a client’s wishes with suitable investments.

For example, if a 70-year-old retiree tells his financial planner that he wants to preserve capital with low risk and low returns, the adviser must follow these instructions and not risk the client’s money in any unsuitable investment unless the client signs off on the recommendation. If a financial planner invests a client’s money in unsuitable investments and loses capital, they may face a claim of financial negligence.


Financial Advisers & Investment Risks


Financial advisers are responsible for not only thoroughly researching any investment vehicle they recommend, but for also taking steps to fairly communicate the nature of the investment to clients.

Financial advisers transacting investments on behalf of private customers are specifically required to ensure that customers understand the costs and risks of each investment they recommend or sell. If they fail to disclose pertinent information regarding risk or fees, and significant capital is lost, a client may have a negligence claim against the adviser.


Misleading Remuneration & Commission Fees


Before any investment transaction on behalf of a customer, financial advisors must disclose in writing the detail and associated fees for the particular transaction, and the amount of any other remuneration and commission paid to the financial advisor by the product or providing bank/financial firm.

This type of disclosure must cover any product-related charges deducted from the investment capital. Financial advisors who recommend individual or packaged products must disclose all built-in fees and the commission which they are to receive from the product provider. Failure to properly disclose all costs to the client prior to the transaction can result in a negligence claim.


What is Investment Fee Churning?


If a broker is entering a client’s account capital in and out of many investments in a short period of time, without prior consent, they may be engaging in a “churning” tactic meant to incur heavy fees or commissions for their own benefit.

The churning of a client’s investments is ordinarily contrary to a client’s interests if the adviser is the main beneficiary. If an adviser enters into transactions with unnecessary frequency without regard to the customers agreed investment strategy, this could be the basis of a negligence claim.


Is Your Financial Advisor Negligent?


It isn’t always clear when a financial planner has acted illegally or unethically, though the following questions may help determine if you have a reasonable claim against your adviser:

•    Has your advisor always conducted business with integrity?
•    Has your financial planner demonstrated expertise, care and due diligence?
•    Has your personal account been protected with an effective and adequate risk management system?
•    Does your adviser act with only the best interest of your investment capital in mind?
•    Does your adviser communicate important information in a clear, fair, and not misleading manner?


Financial Advisor Negligence Lawsuits


Thousands of Americans put their trust in financial advisors to professionally manage their money and their futures. When this trust is breached by unethical financial advisers, victims have the right to sue for negligence and recover investment capital that was lost due to fees, commissions, or risky decisions recommended by the adviser.

If you have questions about your financial planner, it is wise to collect all written contracts and transaction records for further investigation. Often, the contract between an adviser and a client is implied because the adviser has a professional duty to carry out his mandate with reasonable skill, care and diligence.


Ohio Financial Fraud Attorney


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If you suspect you have been a victim of financial fraud, and have questions about the legal remedies available to receive fair compensation in Ohio, contact The Lyon Firm at (800) 513-2403. You will speak directly with Mr. Lyon, and he will help you answer critical questions regarding financial advisor negligence and filing a claim.