Former SEC Prosecutor
and Wall Street Defense Counsel
As volatile as the market is these days, it’s understandable if you are focusing more on the value of your investment portfolio. But it’s important to also keep in mind the value of your investment advisor. And understanding their value proposition goes beyond whether they give you sound financial recommendations. It also means they should be charging you fair rates for their services.
Unfortunately, for too many advisors, that just isn’t the case. They may overcharge clients through fee manipulation and undisclosed commissions. Let’s discuss some red flags that may indicate if your advisor is overcharging you.Excessive Fee Claims
In a “Risk Alert” published by the Securities and Exchange Commission (SEC), the SEC warned that some advisers were overbilling fees. One method was switching the metrics for valuing the assets in a client’s account to a different manner than was in the client’s advisory agreement. For example, under the agreement, the advisor should charge based on a client’s average daily balance, but, instead, they charge fees based on the market value of the assets at the end of the billing cycle.
Other techniques advisors used to inflate fees include:
Another way to overcharge clients is to bill them for extra work they didn’t need to do: For unscrupulous advisors, that can include “churning,” an illegal practice that describes when advisors make excessive purchases and sales of securities solely to drive up their commissions and without regard for the investor’s investment goals.
Signs that your advisor may be engaging in churning include when there is unauthorized trading on your account or if your advisor is frequently making “in-and-out” trades that are inconsistent with your goals.Alternative Investments May Have High Costs
Alternative investments have risen in popularity over the last decade. These illiquid securities frequently tied to non-stock market related assets such as real estate or life insurance are frequently sold as offering high returns without being tied to the stock market. These alternatives frequently have high internal costs and pay stockbrokers a commission of 8% or higher to find investors. Since these assets have no public market, investors are frequently unable to sell them if something goes wrong. Our attorneys represent investors stuck in these alternatives to recover their losses through FINRA arbitration and reports to the SEC whistleblower office.
If you are concerned that your advisor may be overcharging you, the experienced attorneys at The Silver Law Group and the Law Firm of David R. Chase are here to help. They can explain possible legal avenues available to you to get the compensation that you deserve. For a free, confidential consultation, email us or call us today at (800)975-4345.