Should I be worried about my financial advisor?
May 16, 2017 10:12 AM   Subscribe

Just got SEC-mandated background on a financial adviser. Lots of cash settlements over customer complaints. Not sure if it's cause for alarm, or par for the course for a big bank?

Typical example is "Customer complaint: client claimed that portfolio was too aggressive for her stated financial needs. Settlement of $20k and financial institution admits no wrongdoing." There are about a dozen of these on the disclosure mailing.
So I'm not sure if this means that there are serious problems with the financial adviser, or if such settlements are the equivalent of Starbucks giving you a freebie if your barista sneezed in your latte.
I should also note that I do not deal directly with this financial adviser, but with a colleague. I've received no SEC disclosure on the colleague, and my parents worked with said colleague for years with no issues.
posted by The Ardship of Cambry to Work & Money (16 answers total) 3 users marked this as a favorite
I have been in business over 20 years and have not had ONE complaint. Find someone else.
posted by jtexman1 at 10:26 AM on May 16 [28 favorites]

If I yelped a Starbucks location and there were a dozen 1 star reviews saying "clean bathrooms, but the barista sneezed in my latte" I would avoid that Starbucks.

Also, if the typical complaint/settlement example shows a repeated indication that this advisor doesn't listen to their clients' stated needs, then that would doubly give me pause. This is your money and your future financial security. You want a financial advisor who listens to you.
posted by phunniemee at 10:30 AM on May 16 [6 favorites]

"Too aggressive for her needs" is the kind of complaint financial companies normally fight tooth and nail, because they make their living off walking that line, and the law is generally in their favor. If there are multiple settlements to that effect, the behavior must have been pretty egregious. I'd avoid.
posted by praemunire at 10:36 AM on May 16 [2 favorites]

...however, if we are talking about a large institutions with a multitude of such "advisors," it might not be totally imprudent to look at the disclosures as more of a red flag. It suggests that compliance may not be doing the greatest job, but one person misbehaving out of (e.g.) 10,000 might not warrant an automatic firing. However, if this is a smaller firm, failure to prevent the behavior suggests a more serious cultural problem there.
posted by praemunire at 10:38 AM on May 16 [3 favorites]

@praemunire: This is a very large institution.
I looked up the person I deal with directly on the FEC site. She had all of one customer complaint against her and the claim was denied.
posted by The Ardship of Cambry at 11:26 AM on May 16

Why are you receiving disclosures for someone you won't be working with? Are they actually colleagues, or is it a junior-senior relationship, where your advisor on record is actually the guy with the complaints?
posted by danny the boy at 11:30 AM on May 16

@danny the boy: beats the hell out of me. Will definitely double-check with my person there.
posted by The Ardship of Cambry at 11:34 AM on May 16

Don't ask "your person," who has every motivation to fob you off. Call the department which sent you the disclosures and inquire. They have some of that motivation, but will probably explain why they sent you those particular disclosures (or if it was an error).
posted by praemunire at 11:42 AM on May 16 [3 favorites]

Not to paint with an overly broad brush, but financial advisers with a history of misconduct are more likely to end up at a firm with more people like them, according to a recent study.
posted by Mr.Know-it-some at 11:50 AM on May 16 [1 favorite]

Personally, my threshold for financial advisement is pretty damned low. Unless you're in a complex or special situation there's not a lot they can tell you that you can't do on your own. Their incentives are usually not aligned with your own (i.e., they're salesmen, not "advisors").

Not knowing much about your needs, I feel like you're about to step into a den of vipers that has a guy that the snake association is obligated by law to warn you about.
posted by danny the boy at 12:08 PM on May 16 [8 favorites]

I second danny the boy's question but in general I would run run far away from this person. One complaint? Okay. Two? Warning! Ten? Aw hell no.

The last people I worked with worked for 35 years each in the business and had two complaints each over that time period.
posted by small_ruminant at 12:21 PM on May 16 [1 favorite]

And now that I think about it, I'm not even sure complaint is the right term. They screwed something up, admitted it immediately, and made the client whole (which is a rigamarole in itself- you aren't allowed to just write checks made out to clients willy nilly.)
posted by small_ruminant at 12:24 PM on May 16

As you may already know, not all financial advisors hold a fiduciary responsibility to you the client. That means, putting your financial interests above their own. Their recommendations can be based on what fees and kickbacks they get, rather than how much growth or risk you get.

In fact, the industry has fought tooth and nail against the DOL's fiduciary rule.

Look up: financial planner and fiduciary rule.

I'm sure there's good ones out there. In the long run, it's worth paying more for good advice.
posted by metaseeker at 1:16 PM on May 16 [2 favorites]

I have been registered with the SEC, NASD and FINRA since the mid 1980s. I have had firm wide compliance responsibilities. I have not had one customer complaint. That is not to toot my own horn, but to show that it is fairly easy to keep a clean reputation if you want to. Just act ethical.

Reps make mistakes. Reps and firms can admit their mistakes and fix them. When it gets down to a settlement for an officially filed case, it has gone pretty far. $20k could be simply a nuisance figure, but if it were me, I would fight to the end to keep my record pristine if I had done nothing. Being willing to put a black mark on your record where your reputation is your most precious asset says a lot to me. I would have some serious concerns with this rep or this group of reps. They often work in teams. Can better serve the client, blah, blah. Look at the entire team. As someone posted above, good clean reps stick with other good clean reps and black mark reps seem to gravitate together too.
posted by AugustWest at 1:36 PM on May 16 [1 favorite]

Stop. Go to a new person. One complaint is explainable. Two is not. This many? Run away.
posted by BrooksCooper at 11:22 PM on May 16 [1 favorite]

Run fast, run far.
posted by medusa at 11:26 AM on May 19

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