Can I Sue My Fiduciary for Advisor Negligence?

Investment is a risk but one which can be well calculated. This is where financial advisors come in. They are tasked with helping us achieve and maintain financial security.

We bank on their advice and recommendations to make investment decisions. Therefore, it is right to say clients place great trust in them. These professionals are mandated to work diligently in your best interest, but sometimes, they don’t.

If you lost money due to a breach of fiduciary duty by a financial advisor, you can sue with the help of a financial negligence lawyer.

What Is Advisor Negligence?

Advisor negligence is when the financial expert you contracted fails to recommend proper investment strategies. This may include failure to do due diligence on an investment before recommending it.

Negligence may also result from a delay in the advisor’s communication of guidance or completely abandoning your investment portfolio without notice while the agreement is still valid.

Understanding Your Rights with a Financial Advisor

First, before you hire a financial advisor, confirm if they are fiduciary. Only a fiduciary financial advisor is mandated by law to act solely in your best interest. 

When you entrust your money to a fiduciary financial professional, they are obliged to act in specific ways that should make you money.

The North American Securities Administrators Association (NASAA) details your entitlements in its “Investor Bill of Rights.” 

When you sign an agreement with a fiduciary, you have a right to; 

  • Ask for and receive information from a firm about the work history and background of the person handling your account, as well as information about the firm itself.
  • Receive complete information about the risks, obligations, and costs of any investment before investing.
  • Receive recommendations consistent with your financial needs and investment objectives.
  • Receive a copy of all completed account forms and agreements.
  • Receive account statements that are accurate and understandable.
  • Understand the terms and conditions of transactions you undertake.
  • Access your funds in a timely manner and receive information about any restrictions or limitations on access.
  • Discuss account problems with the branch manager or compliance department of the firm and receive prompt attention to and fair consideration of your concerns.
  • Receive complete information about commissions, sales charges, maintenance or service charges, transaction or redemption fees, and penalties.
  • Contact your state or provincial securities agency in order to verify the employment and disciplinary history of a securities salesperson and the salesperson’s firm; find out if the investment is permitted to be sold; or file a complaint.

When Can I Sue My Financial Advisor for Negligence?

Under U.S. federal securities law and FINRA regulations, you cannot sue your advisor for losing money, even if the advisor recommended the bad investment.

However, you can sue if you believe your advisor was engaged in negligence. There are some cases where the advisor’s negligence is apparent, while some with oblivious details will require more digging. 

Before you sue, you must understand the legal responsibility of your advisor and their liability to clients.

Types of Financial Advisors and Their Responsibilities to Clients

Registered Investment Advisors (RIAs)

RIAs are fiduciaries registered with the Securities and Exchange Commission (SEC) or state securities commission. They are legally obligated to put their client’s interests ahead of their own. Their financial recommendations must also align with the client’s financial goals and risk tolerance.

Broker-Dealers (BDs)

Broker-Dealers have lesser legal obligations when compared with RIAs. They are not required to act in the best interest of their clients at all times. Therefore, they are not fiduciary.

However, they are mandated to recommend investments based on their client’s financial situation, investment goals, and risk tolerance. 

Insurance Agents

Insurance agents are also not fiduciary, but they must recommend policies that are suitable for their clients based on their financial situation and insurance needs. 

Your insurance agent also has a legal obligation to ensure you understand the terms and conditions of the policy before signing the agreement.

Advisor Negligence Examples

  • Unsuitable investments
  • Failure to disclose important information
  • Incorrect tax advice
  • Not diversifying portfolio
  • Understating the risk of an investment
  • Auditing errors
  • Missing tax filing returns

Elements You Will Need to Prove Advisor Negligence

To prove advisor negligence, you must be able to provide evidence to support these four elements:

  • Duty describes the advisor’s role to always act in your best interest. You must be able to prove the advisor is a fiduciary.
  • Breach of duty details how the advisor has failed to uphold their fiduciary. Such as failure to provide vital information about an investment.
  • Causation explains why the advisor failed to provide services in compliance with their fiduciary duty. You must also be able to show the advisor has the capability to foresee the harm that would occur.
  • Damages show your loss due to the advisor negligence. Only with proper evaluation of the damages do you stand a chance of getting fair compensation.

How Can You Sue for Advisor Negligence?

When you notice an advisor’s negligence, the first line of action is to lodge a complaint with the Registered Investment Advisor (RIA). If there is no response or positive result, you may try to report the firm to their regulatory authority.

This gentleman’s approach often yields no desirable result as your advisor will likely exonerate themselves, and you will be left holding the bag.

A financial negligence lawyer will help you recover your loss. Our team has years of experience handling similar cases, and we will be happy to examine your case. 

Do not hesitate to call us today at (202)444-4222 or reach out using any of the available on our Contact Us page.

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