Bad investment advice could come in any form and from anyone because pretty much every other person tries to tell you what stocks or bonds to invest in and when. But the law says only licensed professionals can offer qualified financial advice.
As per the Investment Advisers Act of 1940 (a U.S. federal law), anyone who commercially indulges in advising others about securities or buys or sells them on behalf of another should be a legitimate investment adviser.
A bank employee or an insurance salesperson should be licensed to suggest you sell a portion of your investments to buy an annuity. Recommending that you purchase annuity isn’t illegal as per the Act, since indexed and fixed annuities aren’t “investments,” per se. They are insurance arrangements; it’s the advice or suggestion to sell your mutual funds or stocks that’s illegal.
Investment advice could be offered by non-registered investment advisers under a couple of exemptions:
- Advice connected with providing investments for sale could be furnished through a broker/dealer representative.
- Attorneys and CPAs are exempt when offering advice during normal course of work.
Seniors are usually on the receiving end of bad or illegitimate investment advice. The output could be inflated income taxes connected with the sale of appreciated investments, being trapped into an annuity agreement for a long-term period, having to remit a penalty to recover all your money, or being party to a contract that doesn’t live up to original sales pitch.
Who can help victims of bad investment advice? Getting assistance could be tough. Government agencies are not always forthcoming about investigating a complaint properly and the cops may not know what the 1940 Act implies. As a result, most victims find themselves stranded.
Complaints could be forwarded to the SEC (Securities and Exchange Commission), but most times, these investment-related problems fall under the jurisdiction of the state. Another route, is talking to a team of lawyers, such as attorney Stuart Meissner and associates, that specialize in the subject matter. Kindly note, several financial service firms have been prosecuted for their questionable annuity sales in the past.
Tips to Invest Wisely
Here are some key points you should keep in mind when investing:
Do Not Invest as Per a Mandate or Prospectus
Money managers must follow a mandate, but you (the individual investor) have choices and solutions with longer horizons that do not jive with stock jockeys, newsletter editors, and pundits.
Do Not Try to Impress Anyone
Many money managers and trade pundits are constantly in the public eye. Even if they don’t want to make a forecast, they will, as there are people looking forward to their learned observations. Do not be that investor who unnecessarily fiddles with their investment portfolio just because some “expert” tells them to.
Money managers are more interested in days than years because they make money depending on what’s happening currently. For individual investors, it’s typically the other way around. You need not worry about large clients bailing out on you. Therefore, think long-term, as short-term plans could derail your strategies.
Get to know Your Financial Adviser
Ask your financial adviser questions relating to his qualifications, experience, and knowledge. If your adviser is good at what he does, he is likely to have a substantial number of extremely satisfied clients. Ask your adviser to throw more light on those past experiences or talk to those clients yourself to get more insight.