‘She never explained anything to me’: I’m a senior and I lost $100,000 in the stock market this year. Can I sue my financial advisor?

I am a senior citizen and have suffered huge losses to the tune of $100,000 in the recent stock market turmoil. Can I sue my financial advisor? I understand the dynamics of the market in terms of its ups and downs, and I’ve been through them before.

However, it has been different with the market in this time frame to the extent that tech stocks are taking a big hit, just like others. I let my financial advisor know that I was headed for retirement months before this all happened.

As my account was making losses, he did nothing to warn me that given the current situation it might be a good idea to move my assets to another area to lessen the losses and come back at a later date when things have stabilized.

I now find out from other advisors I have consulted with that there is a term called “stop loss” to do just that, stop loss. They also mentioned that she did fail in her role as her adviser. She never explained anything, such as high or low risk management, or any other aspect of the market.

The only time we had contact was when I contacted her to buy different stocks. Other than that, she never called about anything related to my account at any point. Can I sue and, if so, how do I go about doing so?

feel like a fool

Dear FLS,

There are a lot of hurdles you would need to clear in order to have a legal case to sue your financial adviser and from what you have said here it appears that they have not been cleared. Any investment has an element of risk and the S&P 500 SPX,
-1.13%,
Dow Jones Industrial Average DJIA,
-1.01%
and Nasdaq COMP,
-0.95%
have suffered significant losses this year: 19%, 16% and 27.8% respectively.

Last year, you would have been on the pig’s back and consequently a big fan of your financial advisor’s strategy. But no adviser is perfect. And no one, despite previous predictions, can predict the market. Even Warren Buffett, the Oracle of Omaha, he makes mistakes. And he will recognize them when he does. That applies to his financial adviser, and to yourself.

But back to your question of suing your adviser. You will first need to show that he established a fiduciary relationship with her. That is, he promised to put her interests before hers and that he breached her fiduciary duty. He would also have to prove a direct link between his actions and her losses, and show that those losses could have been foreseen.

The Financial Industry Regulatory Authority has rules to help ensure investor protection. read more here. The Gibbs Law Group specifies the difference between outright fraud, misconduct, and negligence, and provides some examples of the latter, including improper investments, failure to disclose material information, and excessive concentration of investments.

Still, don’t wait for your day in court. Most investment contracts include an arbitration clause. Finra and the Securities and Financial Markets Industry Association (Sifma), a trade group representing securities firms, banks and asset managers, argue that arbitration saves all parties valuable time and money, and helps to facilitate small claims from retail investors.

a good counselor

A good advisor should understand your circumstances “and recommend only financial products appropriate for your age, investment objectives, experience, and desired level of risk,” the law firm says. blog about the topic. “But negligent advisors will sometimes steer you into risky or unsuitable investments for higher fees.”

Diversity helps protect investors from excessive losses, but does not prevent them. “Investment overconcentration occurs when an investment or financial adviser fails to diversify a client’s portfolio, subjecting that client to excessive risk of loss,” he adds. Your losses may be across a wide range of stocks, as the overall market has tanked in 2022.

You may not fully understand the concept ofstop loss” and how such an order is produced. That is an order made by the investor, perhaps in consultation with his broker, to sell a stock if it falls to a certain level. But while that may stop the bleeding in his portfolio, it could also lead him to sell too many shares at a lower price, not waiting for a potential rally.

There will be a paper trail, but it doesn’t seem likely that your advisor can be sued for not communicating with you as often as you’d like, even in a turbulent market like this. Sometimes the best action is not to act. You lost $100,000. We don’t know if that’s 100% or 10% of his overall portfolio. In general, as retirement approaches, your investments should be more conservative.

Obviously, if you consulted a lawyer, you would need to present more details. However, based on his letter, it seems that he is upset about his losses on paper and his adviser is taking the blame. But despite the conditions for suing his advisor laid out above, there are two people in this relationship, and in many cases, liability works both ways.

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