Hello. I’m attorney Robert Port, and I repr...
Hello. I’m attorney Robert Port, and I represent people who have been harmed by the misconduct of their financial advisor, stockbroker, or insurance agent.
If you use a stockbroker, they have an obligation to recommend investments that are suitable for you. I often am asked how to determine whether an investment, or an investing strategy, is suitable. To make that assessment, here are some of the things I look at:
Did The Broker Get To Know You? Did the broker discuss with you your current financial situation, net worth, needs, and risk tolerance? A broker cannot determine whether an investment, investing strategy, or insurance product is suitable for you unless they know something about you. Did the broker ask what your annual income is and your net worth? Did the broker determine whether you may need cash soon, to buy a home, or to send children (or grandchildren) to college, or if you will you need to support an elderly relative? Did the broker ask whether you can’t sleep at night if your investments go down even a little, or are you a long term investor, not worried about short term fluctuations in your investments?
A broker or financial advisor who has not asked these types of questions cannot determine what a suitable investment is for you. Many times, their goal is to sell you whatever they or their firm is pushing at that particular time, including insurance products like variable annuities or whole life, or perhaps a stock or mutual fund that is being promoted by the brokerage firm.
If you are offered an investment by a stockbroker, insurance agent, or investment advisor who has not taken the time to find out about your individual needs, don’t fall for their sales pitch, no matter how convincing.
[another question I ask is]:
Are You Diversified? The old saying that you “shouldn’t put all your eggs in one basket” applies to investing as well. For most people, a diversified portfolio of stocks and bonds is appropriate, with the general rule of thumb being that as you get closer to retirement, more of your investments should be in bonds and cash investments.
Diversification means that you own stocks (individually or through a mutual fund) of both large and small companies in a variety of industries, in the US and internationally, as well as having exposure to government, municipal and corporate bonds.
If your broker has you primarily invested in one stock, or in the stocks of just one industry, your investments may not be diversified and suitable for you.
Sometimes, a careless or unscrupulous broker will advocate placing a substantial investment in the low-priced stock of a small unknown company, convincingly arguing that if the price goes up just a little, you will make lots of money. While it is true that Microsoft, Google and Apple were once small unknown companies and their early investors have done very well, thousands of other similar companies have failed, taking all of their investors’ money down the drain with them. Don’t take that risk. Similarly, if your investment advisor recommends placing all of your money in variable annuities, whole or variable life insurance, limited partnerships, or a private investment, you likely have a very risky, unsuitable portfolio.
[another question to ask is whether]:
Is Your Portfolio More Volatile Than The Market? Investing is not without risk, and not every loss entitles an investor to a legal recovery. But if a suitable investment portfolio has been constructed, the market fluctuations losses an investor experiences ought not to be significantly greater than a well known benchmark for the entire stock market, such as the Dow or the S&P 500. If, when the overall market is down 10%, you are down 40%, it may well be a signal that you are in investments that are unsuitable for you.
Steer clear of any advisor who has the same solution for everyone – whether a standard selection of stocks and bonds, a variable annuity, an equity indexed annuity, whole life insurance, limited partnership or tax shelters, or private investment deals. In investing, one size does not fit all. Each of us has our own set of financial circumstances, retirement goals, immediate and long term cash needs, and risk tolerance. Our investments need to be tailored to fit our individual situation. Often, such advisors are either poorly trained, or promote what is going to generate the most commission for them, whether or not suitable for their client.
If you believe you have been placed into an investment not suitable or appropriate for you, feel free to contact me to see if there might be a remedy.