Ask an Advisor: I'm Losing Money on My Investments. What Responsibility Does My Advisor Have?

As an investor, it's natural to feel concerned when your portfolio is losing value. But who is responsible for these losses, and what can you do about it? In this article, we'll explore the responsibilities of financial advisors and how you can hold them accountable for their actions.

Understanding Financial Advisor Liability

Financial advisors have a legal responsibility to act in their clients' best interests. This is known as the fiduciary duty, which applies to Registered Investment Advisors (RIAs). Broker-dealers and their registered representatives must adhere to the suitability standard, which requires them to recommend investments that are suitable for their clients based on factors such as the client's age, investment experience, financial situation, and investment objectives (Source: SEC, "Investment Advisers Act of 1940" and FINRA, "Suitability").

Advisors must also disclose any conflicts of interest that could affect their ability to provide impartial advice. This includes any fees, commissions, or other compensation they receive for recommending certain investments (Source: SEC, "Investment Advisers Act of 1940").

Proving Financial Advisor Negligence

To prove financial advisor negligence, you must demonstrate that the advisor breached their duty of care, and this breach caused harm or financial loss to you. You'll need to gather evidence and documentation to support your case, such as:

* Records of the advisor's recommendations and the investments made based on those recommendations
* Evidence of the advisor's failure to disclose relevant information or conflicts of interest
* Expert testimony to bolster your claims of negligence
* Documentation of any regulatory breaches or failure to meet industry standards
* Evidence of the advisor's lies or mis-selling of financial services leading to investment losses
* A clear link between the advisor's negligent actions and your financial damage
* Evidence of a breach of legal responsibility, such as malpractice



Steps to Take Before Suing a Financial Advisor

Before proceeding with a lawsuit against a financial advisor, it's essential to explore alternative dispute resolution methods, gather evidence and documentation to support your case, and consult with a legal professional to assess the viability of your case. Attempting to resolve the issue through negotiations, mediation, or arbitration can help you avoid the time and cost of a lawsuit.

What to Do if Your Advisor is Responsible for Your Losses

If you've determined that your financial advisor is responsible for your investment losses, you have a few options:

1. File a complaint with the SEC or FINRA: If your advisor is registered with the SEC or FINRA, you can file a complaint with the appropriate regulatory body. They may investigate the complaint and take disciplinary action against the advisor if warranted.
2. Sue your advisor: If you've exhausted all other options and believe you have a strong case, you may choose to sue your advisor in court. This can be a lengthy and expensive process, so it's essential to consult with a legal professional before proceeding.
3. Negotiate a settlement: In some cases, you may be able to negotiate a settlement with your advisor outside of court. This can save you time and money, but it's essential to consult with a legal professional to ensure you're getting a fair settlement.

In conclusion, financial advisors have a legal responsibility to act in their clients' best interests and provide suitable investment advice. If you're losing money on your investments, it's essential to investigate whether your advisor is responsible for your losses and take appropriate action. By understanding your rights and the legal obligations of financial advisors, you can hold them accountable for their actions and potentially recover your losses.