Why Many Investor Losses Are Due to Brokers Making Unsuitable Recommendations
Strong legal counsel when brokers do not consider the needs of the investor
The primary job of a stockbroker or an investment firm is to understand the needs of the investor, and recommend investments that are suitable for those needs. Brokers must use due diligence to understand what expectations the investor has, how much he/she can afford to invest, and how much the investor can safely risk. Brokers should also study the various types of investments to fully understand the potential benefits, risks, and costs of each investment. Suitability claims are one of the most common types of claims heard in FINRA arbitrations.
The legal team at The Frankowski Firm has the experience to review an investor’s portfolio, examine the recommendations that were made, and determine the amount of financial loss caused by the unsuitable recommendations.
What are some suitability factors?
In order for a broker to make suitable recommendations, they must know their customer. The “know your customer” rule requires that a broker understand certain things about every client. These include the investor’s
- Investment objectives
- Risk tolerance
- Level of sophistication
- Net worth
- Tax status
- Investment time horizon
- Liquidity needs
Not every investor has the same goals. Investment advice should be on a person-by-person basis.
When can an investor bring a suitability claim?
Brokers and brokerage firms owe a duty of care to their clients to ensure that they have accurately and appropriately assessed a client’s goals and risk tolerance before offering any advice about potential investment purchases or sales. An investor, however, may bring a claim for unsuitability when:
- The broker fails to accurately identify and/or explain the risk of an investment;
- The broker act in a way that is contrary to an investor’s explicitly stated objectives;
- The broker has committed an illegal act or engaged in fraudulent activity;
- The manager or supervisor of the broker has not properly supervised or trained the broker, leading to inappropriate or mismanaged investments.
If you believe that the recommendations of your broker were unsuitable, our attorneys can help you determine if you have a claim. We then work closely with you to obtain you the damages you deserve.
When your investments don’t match your needs or goals, contact an experienced attorney
The attorneys at The Frankowski Firm understand the complexities of financial investments. We know how investment advisors are supposed to talk to investors, what information they should obtain from the investor, and what advice is proper. When brokers and investment firms fail to know the customer and fail to recommend suitable investments, our attorneys have the legal acumen to demand payment from these negligent individuals and companies. We have helped many wronged investors get financial justice. For help now, phone our lawyers today at 888-741-7503 or complete our contact form.