A:

Financial advisors and planners have fiduciary responsibilities to their investors. They owe their investors a high degree of loyalty as they are in positions of trust and confidence. Execution of an order depends on the type of order that is placed and the liquidity of the investment. If you asked your financial advisor/planner to sell a specific number of shares of a widely traded company at the market price, you could reasonably expect your market order to execute within 24 hours. Orders that place limits on the order, such as price, will typically take longer to execute. Most financial institutions will not accept email or voicemail trade requests as they can be easily missed; firms now recommend that you speak with your advisor directly or put your request in writing. In any case, you should follow-up on-line or with a call to your advisor before market close for the sell price to make sure the trade was executed on your behalf.

Advisors and planners have duties to inform their clients of transaction and investment risks. When they are disloyal and betray that trust and confidence, they can be held liable for damages. If a broker misrepresents or fails to provide information regarding an investment or transaction, you may have a potential claim against that broker to recover your losses.

There are many claims that can be brought by investors against their brokers, brokerage houses, retirement plan sponsors, financial planners, fund managers and investment advisors. The most common claims include:

  • Churning - excessive trading in an account to generate commissions;

  • Failure to execute or follow instructions from the investor with respect to his investments;

  • Margin complaints - such as liquidating securities without giving the investor prior notice, prior to a deadline or after failure to meet a margin call;

  • Misappropriation - misappropriating investor funds;

  • Misrepresentations and omissions - intentionally or recklessly misleading or failing to disclose material facts regarding an investment;

  • Negligence - advisor failing to exercise due diligence and/or failing to act as a reasonable and prudent advisor;

  • Unsuitability of recommendations or investments - advisors are required to determine the suitability of an investment based on an evaluation of the investor/customer's investment experience, risk aversion and other factors.

Each of these claims must be evaluated on a case-by-case basis. In most circumstances, several of these claims can be worked out between the financial firm and the client without ever going to litigation. If an amicable resolution cannot be reached, then you may escalate your case to be decided in arbitration by an arbitrator, who then decides liability and damages, if any.

For related reading take a look at Picking Your First Broker and Shopping For A Financial Advisor.

This question was answered by Steven Merkel.

RELATED FAQS
  1. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  2. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  3. What percentage of a diversified portfolio should large cap stocks comprise?

    The percentage of a diversified investment portfolio that should consist of large-cap stocks depends on an individual investor's ... Read Full Answer >>
  4. Why should an investor include an allocation to the telecommunications sector in ...

    An investor should include an allocation to the telecommunications sector in his portfolio, because telecom offers an investor ... Read Full Answer >>
  5. What are some mutual funds that do not have 12b-1 fees?

    Some of the most popular and best-performing mutual funds that do not include any 12b-1 fees in the expenses charged to fund ... Read Full Answer >>
  6. Are there mutual funds that take advantage of merger arbitrage?

    A few select mutual funds focus investing on merger arbitrage. Among these are the Merger Fund, the Arbitrage Fund and the ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares Agency Bond

    Find out about the iShares Agency Bond exchange-traded fund, and explore detailed analysis of the ETF that tracks U.S. government agency securities.
  2. Professionals

    How to Protect Elderly Clients from Predators

    Advisors dealing with older clients face a specific set of difficulties. Here's how to help protect them.
  3. Professionals

    Social Security 'Start, Stop, Start' Explained

    The start, stop, start Social Security strategy is complicated. Here's what retirees considering it need to consider.
  4. Brokers

    Broker-Dealer Industry 101: The Landscape

    Independent broker-dealers are a great choice for experienced, self-starter planners who have established practices.
  5. Professionals

    Small RIAs: How to Level the Playing Field

    In order to compete with larger firms, small RIAs have to get a little creative. Here are a few ways to kickstart growth.
  6. Professionals

    Top Social Security Issues for Divorced Women

    What female divorcees need to know about the twists and turns of figuring out Social Security benefits.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Low Volatility

    Find out about the PowerShares S&P 500 Low Volatility ETF, and learn detailed information about this fund that provides exposure to low-volatility stocks.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Bond

    Find out about the Vanguard Intermediate-Term Bond ETF, and delve into detailed analysis of this fund that invests in investment-grade intermediate-term bonds.
  10. Professionals

    Is it Time to (Finally) Push Kids Out of the Nest?

    Parents should make sure their kids realize their home is a launching pad not a landing spot, and advisors can help clients talk to their children.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth ...
  3. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  4. Excess Judgment Loss

    The amount of additional loss that an insurer is required to ...
  5. Honorable Undertaking

    A reinsurance treaty clause indicating that the agreement should ...
  6. Financial Singularity

    A financial singularity is the point at which investment decisions ...

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!