As the financial tide recedes due to the pandemic, supply chain disruptions, rising interest rates and other forces we can expect more investors to discover unsuitable, nefarious or otherwise damaging misconduct by their financial advisers and money managers. This is primarily because of belt tightening and liquidity pressures that cause investors to more closely review the activities in their accounts, only to discover mismanagement and serious losses. In many cases investors, tight on cash, ask their advisers to withdraw investment funds which are shockingly less than previously understood. We have seen this cycle play out in many situations over the decades, particularly when markets are shocked into sudden retreat.

Q: What kind of problems do you expect to see from the recent big market drop?

A: I expect to see investors become aware that investments described previously as "conservative" or "safe" by their financial experts are unsuitable, and should never have been recommended. In times like these, all sorts of things that have been concealed suddenly come to light. Families of the elderly and busy professionals find that their accounts or those of loved ones have been abused or funds misapplied or missing. Further, losses become realized due to unsuitable investments, margin calls and portfolio liquidations caused by the advisors neglect or fraud. I believe that the threat of liquidation of retirement accounts will become more frequent as public investors realize losses due to unsuitable margin accounts and exposure to inappropriately risky investments recommended by the broker Commission rich "products" sold by brokers to clients include Wall Street's "Portfolio Loan Accounts", and variations thereof. Portfolio loans, a structural relative of traditional margin loans, are fraught with danger to unknowing investors despite being relentlessly marketed by brokers and financial advisors. Margin and Portfolio loans are characteristic of the mortgage products which took down economies worldwide in 2008. Instead of over-leveraging your home, here the advisor recommends overleveraging your retirement accounts. In short, investors were advised o put up their retirement and savings accounts as collateral for loans. Margin and portfolio loans were, and are, antithetical to the protocols and goals of long term investing and are frequently misrepresented by financial advisors. The extreme risks of margin and portfolio loans never seem to be the focus of advisors' sales presentations, yet once established based on the advisors word, are financial time bombs which pose the ever present danger of destroying the clients' financial futures. Motivation to encourage unsuitable loans and defraud investors is strong as Brokers, Financial Planners and Financial Advisors are handsomely compensated for getting you to agree to loans.

Q: How do cases arising from the 2020 market collapse and recent volatility compare to 2008 in terms of customer/broker issues you expect to see ?

A: Since 2008 and a few years before there was a huge shift in the sales and marketing structure within the retail financial services industry - away from traditional "brokers" (for example "stockbrokers" working for Wall Street firms) - to fee only Registered Investment Advisers (RIAs). Stockbrokers must register with FINRA and RIAs must register with the Securities and Exchange Commission (SEC). RIAs and stockbrokers are subject to strict ethical and professional rules and oversight. However many "Financial Advisers", "Financial Planners", "Wealth Managers" and others presenting themselves as financial investment experts are neither registered, supervised or qualified to provide investment advice or sales.

Commission based compensation systems for Stockbroker management of customer accounts are all but gone given the advent and success of discount brokers such as Charles Schwab and Fidelity Investments. However we observe rampant abuse by purported "financial planners", "wealth managers", "financial advisers" who use these titles to gain the trust and confidence of those needing professional help growing and protecting family wealth when they are not qualified or not intending to provide bona fide financial management. Instead they are in business for the fees taken from their trusting clients. These type of abusers are very dangerous as they frequently cost customers a significant chunk or all of their life savings, destroying dreams, and significantly impairing the lives of victims. Most registered financial advisors are good, honest and hard working professionals who pledge, and are legally bound in all circumstances, to put the clients' best interests ahead of their own interests. However many of these "financial advisers" or "financial planners" use their impressive titles to gain the trust and confidence of unsophisticated folks and set out to sell commission rich investments such as life insurance, private placements and other products as part of a "financial plan" supposedly, but not, prepared in the clients best interests. If undetected unqualified "financial planners" and advisers who secure your trust and confidence can covertly secure huge and often undisclosed commissions by selling products such as annuities, structured products, tax deals and life insurance which are unneeded and not appropriate while the victim's investment portfolio withers away without due care.

Q: What is the difference between a Broker and a Financial Adviser?

A fundamental legal difference between RIAs and brokers is that all "Investment Advisers" owe clients a Fiduciary Duty - to act in the best interests of clients. They are required to file detailed Disclosure Statements with the SEC that are available to the public. RIAs are not allowed to simply sell products available to them through their companies, as "Registered Investment Advisers" must advise clients and only suggest products and strategies that are the best for their clients. In short properly licensed and supervised investment advisers are legally required first and foremost to be working in the best interests of you - the client investor. Once a dispute exists, sharp defense attorneys and their sophisticated Wall Street clients frequently argue that brokers and financial advisers can act in their own interests because no fiduciary relationship exists - even if the broker tells you differently! The typical client nowadays of Investment Advisors is a professional (e.g. Doctor, Lawyer, Engineer, Scientist, Business Owner) highly focused on and dedicated to their work. Other types of reliant investors including retirees, Family Trusts and those with limited or no investment experience are relatively unsophisticated and easily fooled to believe that their broker or "Financial Adviser" is primarily loyal to them, when they are not. In California "stockbrokers" always have a fiduciary duty to their clients, yet when a dispute arises these same brokers and their firms frequently suggest that the broker owed no duty to the clients at all, let alone a fiduciary duty. Remarkably, slick brokers and firms rarely if ever disclose to investors that the broker's allegiance is conflicted and their loyalty will primarily be decided in favor of the Brokerage Firm. Most of our clients have been shocked to learn, after losing essential savings, that their brokers' primary allegiance is to themselves and their firms - NOT to the client investor.