Thursday, July 8, 2021

Does It Make Sense to Sue Your Financial Advisor?

Every investor dreams of making money and becoming financially secure. Of course, investments differ in risk and your financial advisor or broker should help you understand the level of exposure. Every day, there are complaints by investors complaining about brokers, estate planners or other trusted financial helpers who caused them losses. What happens next? Do you absorb the losses and plan the next move? Does it make any sense to sue your brokerage firm or investment advisor?

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If you’re an investor, it’s always good to learn as much as you can about the legal role of your investment advisor. Learn more from this Seeman Holtz investigations insight on the best course of action if you make a loss.

Can You Sue Your Investment Advisor?

For a start, you have to agree that the loss of all your savings or any savings for that matter causes emotional trauma. Most people can’t think straight even as harsh reality sinks in. After losing money on investment guidance given by your broker or investment advisor, the first thing that comes to mind is a lawsuit. After all, the law is supposed to set things right but is it always that easy?

When signing a contract with your financial advisor, it’s highly likely that there’s a clause about liability. Most investment advisors understand the risks involved in the business. They draft the contracts and will definitely set in some clauses to protect themselves.

So, after realizing you’ve made huge losses, you have to consider the best course of action. Of course suing the brokerage firm is the first thing that comes to mind but the odds are stacked against you. Your investment advisor can plead innocence and resort to clauses in the contract which exempt them from any liability.

Unless it’s an express issue of fraud, you have to build your case and show how the brokerage firm deliberately led to your losses. In most cases, this means hiring a legal team which eats further into your savings.

It’s always good to approach the matter with a level head and rely on the best legal advice from your attorney. Talk to the investment company and find a middle ground. These companies invest heavily in legal advice to avert issues which might prompt integrity queries. The company might be willing to settle or offer some other form of relief.

When Can You Sue Your Financial Advisor?

If you work with a reputable and established financial firm, it’s easier to get reprieve in case of losses. You can retain a lawyer to guide you through the process. Some situations where legal recourse would work include:

  • Poor choice of investments

  • Lack of diversification

  • Unauthorized trading

  • Fraud and negligence

  • Breach of fiduciary duty

  • Material omission or misrepresentation

For your case to succeed, you need to prove fraud, negligence or poor judgement by the financial advisor. When you hire a lawyer, it’s easier to force the investment company to the negotiating table. If the firm has a reputation to protect, they might not want to be dragged to court.

Wondering what to do about the financial losses from your investment? Don’t panic. Talk to your attorney who will review your case and determine the best course of action.

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