
Financial advisors or financial advisers are among the most popular professionals in the financial industry. New investors usually approach them for investment portfolios most suitable for their personal financial goals.
Hiring a personal advisor can save you time and money while their knowledge and guidance help you to make more significant financial progress than you may make on your own.
Unfortunately, this is not always the case. Some financial advisors, against their obligation by law, make decisions that jeopardize their clients’ investments and best interests.
Understanding what to expect from a financial adviser before hiring one is essential. It helps you choose the best for your financial plan, and you will be able to recognize misconduct whenever it occurs.
If you or your loved ones are victims of a financial advisor’s breach of fiduciary duty, you may be entitled to compensation for your financial loss.
To get started, you will need help from an experienced breach of fiduciary duty lawyer at S.A. Law Group. Contact our team today by phone at (202)444-4222 or use any of the available options on our Contact Us page.
Fiduciary duty is a relationship often between a professional and a client. It mandates that the professional, called the fiduciary, always act in ways that benefit the client financially. The client in a fiduciary relationship is called the principal or the beneficiary.
Anyone who offers financial advice can claim the title of a financial advisor. Hence, not all financial advisors are legally required to offer financial advice and related services in their client’s best interests.
This is the main distinction between financial advisors and fiduciary financial advisors.
According to the U.S. Securities and Exchange Commission, in its 2018 definition of fiduciary duty, a fiduciary is held to the highest standard of conduct and must act in the best interest of its client.
The primary duties of a fiduciary financial advisor include the following:
Fiduciaries must act in their beneficiaries’ best interests, not their own. Any potential conflicts are expected to be disclosed.
As professionals, fiduciaries must review all material information before advising their principals. This can also be described as conducting due diligence.
All actions and advice given to clients must comply with the law. A fiduciary cannot encourage their beneficiaries to engage in criminal activities.
Fiduciaries must protect their clients’ information and not disclose it for their personal gain.
All decisions must be made with the highest degree of care, skill, and caution. Only factual information about an investment is expected to be presented to beneficiaries.
Fiduciaries must disclose all information that could impact their beneficiary or their own ability to uphold their fiduciary duties. For example, fiduciaries are not allowed to accept compensation from a third party. It will be a breach of contract if a fiduciary recommends an investment opportunity with the aim of getting a referral commission from the company without informing the beneficiary, irrespective of its potential.
The law permits all individuals to hire financial advisors of their choice. However, only fiduciary financial advisors are required to prioritize your best interest over theirs.
Fiduciaries are Registered Investment Advisors (RIAs). According to the Investment Advisers Act of 1940, only firms registered with the Securities and Exchange Commission (SEC) are recognized as fiduciaries.
There are exceptions to this. RIAs with less than $100 million may register with their state securities commission. But those with $100 million or more need to register with the SEC.
RIAs are business and typically employs investment advisor representatives (IAR). You will likely be dealing with these professionals when you hire a fiduciary financial advisor.
Always check the SEC Investment Advisor Database to confirm if an Investment Adviser Firm or individual investment adviser representative is registered with the SEC or a state bureau.
Registered Representatives of a Brokerage firm can also be found in the database. BrokerCheck is an alternative to check if a broker firm or stockbroker is legit.
Meanwhile, a fiduciary relationship is activated when you sign an agreement to work with an investment advisor ― an individual or a firm.
If you are worried your financial advisor breached their fiduciary duty, the first line of action is to terminate your agreement with the individual or firm.
You can sue for damages if the actions of the financial advisor or broker resulted in financial loss. Do not hesitate to contact a reputable security attorney for advice on how best to pursue your claim against the financial advisor or stockbroker.
Before you can file a case, the financial advisor must be a fiduciary; hence, you must be able to provide evidence to support the claim that they breached their fiduciary duty.
Typical examples of breach of fiduciary duty by a financial advisor include:
Ideally, when you notice there is a breach of fiduciary duty, you should be able to write your financial advisor pointing out their errors, and demand compensation.
They are supposed to apologize and pay the compensation. But this is not what happens in the real world.
Investment advisors will most likely deny being responsible for the financial loss and instead blame everyone and anything else. They will shift the blame to you, the market fluctuation, or both.
Expect email responses with a statement like “our position is clear,” implying they are unwilling to pay the requested compensation and do not care if you decide to take legal action.
RIAs now include mandatory arbitration provisions in the investment agreements they present to clients. The pre-dispute arbitration clause will require you to seek compensation through the FINRA arbitration process.
Be assured it won’t be a smooth ride. Things will get nasty, and if you are dealing with a big firm, they will try to tire you out and frustrate your case. That is why your choice of a lawyer is important at this point.
You need a law firm with experienced lawyers that acts solely in your best interest and will continue fighting until you get fair compensation.
Before it is too late, contact us today so that we can help you get compensation for your financial loss caused by a breach of fiduciary duty.
Fill out the form or Call us at (202)444-4222