|
Posted by Michael on September 13, 2008, 8:04 pm
I have recently left my advisor because he invested in riskier issues
than I initially asked for. I wanted a conservative account and desired
bonds and other safe investments. He juiced up the yield in the account
with preferreds. I had never heard of preferreds before so when he said
to think of preferreds like bonds I said okay. The account had between
60-70% preferreds. Most of these issues were in the financial and real
estate sectors so I've taken a large hit.
My question is this: what is the feasibility of a law suit. I've heard
that you can only get pennies back on the dollar and, frankly, I'm not
even sure if I have grounds for this action. Any thoughts?
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by John A. Weeks III on September 13, 2008, 8:46 pm
> I have recently left my advisor because he invested in riskier issues
> than I initially asked for. I wanted a conservative account and desired
> bonds and other safe investments. He juiced up the yield in the account
> with preferreds. I had never heard of preferreds before so when he said
> to think of preferreds like bonds I said okay. The account had between
> 60-70% preferreds. Most of these issues were in the financial and real
> estate sectors so I've taken a large hit.
Preferred stock is like a combination between a common stock and a
bond. It is safer than a common stock because it is closer to the
front of the line than common stock holders if the company liquidates.
They usually pay a dividend rate, and it is often much better than
what you can get on bonds or CDs. But they do carry a market risk,
so the price will go up and down.
Some preferred stocks have fixed lifetimes. When you buy them, you
know the expiration date and the price that they company will pay
to buy them back. In that case, they will vary with the market,
but if you hold them, they act more like bonds in that you will
get paid the redemption value. Finally, some are set up as
convertables. That is, after a period of time, you can redeem them
for some combination of common stocks, bonds, and cash.
> My question is this: what is the feasibility of a law suit. I've heard
> that you can only get pennies back on the dollar and, frankly, I'm not
> even sure if I have grounds for this action. Any thoughts?
If this was a bigger firm, they will have a person called a
"compliance officer". Talk with that person and let them know
that your broker was engaging in risky behavior without your
approval. The worst that can happen is that they deny it. Once
you get past this step, then post back and tell us what happened.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by Don on September 13, 2008, 10:30 pm
> I have recently left my advisor because he invested in riskier issues
> than I initially asked for. I wanted a conservative account and desired
> bonds and other safe investments. He juiced up the yield in the account
> with preferreds. I had never heard of preferreds before so when he said
> to think of preferreds like bonds I said okay. The account had between
> 60-70% preferreds. Most of these issues were in the financial and real
> estate sectors so I've taken a large hit.
>
> My question is this: what is the feasibility of a law suit. I've heard
> that you can only get pennies back on the dollar and, frankly, I'm not
> even sure if I have grounds for this action. Any thoughts?
I am very much in favor of punishment for unscrupulous advisors who
squander people's investment money in order to get higher commissions
for themselves. But there some things you should clear up first. Please
be more specific about what type of "advisor" did these things. Was it
someone in a brokerage? How was this advisor paid? Did he or she
receive a commission for the products recommended to you? It would help
your case if you could show that the risky products you mention were
ones with hefty commissions for the so-called advisor.
The second thing that is not clear is the kind of "risk" you are
talking about. Preferred stocks are generally less risky than common
stocks. So if 60-70% of your holdings were in preferreds, where was the
risk? Was the other 30-40% in extremely risky stocks, so risky that the
entire account was in danger?
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by Michael on September 14, 2008, 8:22 am
>
>> My question is this: what is the feasibility of a law suit. I've heard
>> that you can only get pennies back on the dollar and, frankly, I'm not
>> even sure if I have grounds for this action. Any thoughts?
>
>
> Please be more specific about what type of "advisor" did these things.
> Was it someone in a brokerage? How was this advisor paid? Did he or she
> receive a commission for the products recommended to you? It would help
> your case if you could show that the risky products you mention were
> ones with hefty commissions for the so-called advisor.
> The second thing that is not clear is the kind of "risk" you are
> talking about. Preferred stocks are generally less risky than common
> stocks. So if 60-70% of your holdings were in preferreds, where was the
> risk? Was the other 30-40% in extremely risky stocks, so risky that the
> entire account was in danger?
The advisor was with A.G. Edwards. In this account he was paid by
commission but not unreasonably so-between 1 to 1 1/2%. So it wasn't
that. Also, the rest of the investments were a combination of bonds and
closed-end funds. Other than the preferreds, I don't think there were
any overtly risky holdings. My question as to risk pertained strickly
to the preferreds.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by Don on September 14, 2008, 4:47 pm
> The advisor was with A.G. Edwards. In this account he was paid by
> commission but not unreasonably so-between 1 to 1 1/2%. So it wasn't
> that. Also, the rest of the investments were a combination of bonds and
> closed-end funds. Other than the preferreds, I don't think there were
> any overtly risky holdings. My question as to risk pertained strickly
> to the preferreds.
You can get excellent financial products without paying anything like a
1 to 1 1/2% commission. Look into Vanguard and Fidelity. Think about
index funds. As far as your suspicions about your advisor are
concerned, you should look at whether or not the particular funds he
recommended to you have larger commissions than alternative products
that better meet your needs. But I still think the best approach of all
is a "no-commission" approach.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
| Similar Threads | Posted | | Becoming a Financial Advisor...How??? | March 1, 2007, 5:00 am |
| financial advisor | May 19, 2007, 4:56 am |
| Pitfalls to avoid when chosing a financial advisor/planner | April 9, 2007, 12:25 pm |
| Limited liability for a financial advisory business | September 12, 2008, 5:36 pm |
| Can anyone recommend a good advisor in Philadelphia/South NJ? | October 27, 2006, 4:55 am |
| Weiner's "Independent Advisor" for Vanguard Funds | December 3, 2006, 12:23 pm |
| understanding liability | March 31, 2008, 10:45 pm |
| umbrella liability insurance? | January 26, 2007, 6:46 pm |
| need to do financial planning | September 24, 2006, 10:34 am |
| Help with some financial planning | September 24, 2006, 2:47 pm |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap