Author Topic: Should I tell a client they’re working with a swindler?  (Read 2059 times)

stahleyp

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Re: Should I tell a client they’re working with a swindler?
« Reply #10 on: August 08, 2019, 11:06:28 AM »
I appreciate the input. I was looking further at the broker-check disclosures. The aggregate settlements paid out on the 25 disputes is around $2 million! How does this person not banned from the financial services industry. I think I'll ultimately bring the issue up with my client genuinely out of concern.

I'm sure he brought in a lot more than $2 million to the firm. The financial services has the reputation it does for a reason. Think about all the clients he talked out of suing him or who didn't figure out the issue.
Paul


coc

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Re: Should I tell a client they’re working with a swindler?
« Reply #11 on: August 08, 2019, 11:31:52 AM »
As a financial services professional, I will state strongly -- you have a DUTY to bring this to your client. Who else can call this stuff out besides professionals? The layperson often doesn't know they're being fleeced, and the regulators are weak, and understaffed.

Do it as best as you can, do it with the most tact you can gather (lots of good suggestions above), but above all, do it.

Since you already manage their money, there shouldn't be any accusation of self-interest. Taking a modest amount of risk to yourself on behalf of others is among the highest forms of honorable behavior.

LongHaul

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Re: Should I tell a client they’re working with a swindler?
« Reply #12 on: August 09, 2019, 12:59:21 PM »
Would you want to know if you were on the other side?  I would.

My experience echoes some of the other members.  I tell the other party and they listen and try to take action or they just stick their head in the sand.  It depends on the person involved (ie big ego, etc). 

Don't take their reaction personally at all if it is adverse.

I have heard from an "insider" that some of these complex annuities are like scams to be avoided.   

(sarcasm: They are so complex and the person selling it must be smart because it is complex so the salesman must be financially sophisticated.  I don't want to say I don't understand it because that would make me look like an idiot.) 

It is a powerful thing saying "I don't understand" or "I don't know" but the most difficult answer of all.



cherzeca

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Re: Should I tell a client they’re working with a swindler?
« Reply #13 on: August 09, 2019, 03:26:00 PM »
can the annuity be unwound?  you likely don't know the answer to that question, though if you can read the contract that should be discernible.  I would want to know if there is a remedy in this situation beyond just dont do more business with the guy

NoCalledStrikes

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Re: Should I tell a client they’re working with a swindler?
« Reply #14 on: August 09, 2019, 06:21:35 PM »
First, I'm not a professional adviser.... but based on my experience with a family friend, you should tell your client about the violations, not because it will change anything in the near term, but because its not ethical for you to sit on this information and you will sleep better knowing you tried to help. 

In my case, the questionable adviser was an outgoing person who had excuses lined up on how his violations were from government regulation run a muck. This played well to my friend's politically conservative nature who found the adviser more believable than regulators. Over time, the adviser's investments high commission private REITs, performed spectacularly poorly even though the quoted price in the statements never went down - until the end - when they eventually liquidated for 25 - 40 cents on the dollar.  I sent her some information on private reits and made clear that I didn't think her adviser's strategy was appropriate, but his pull was too strong.  And while I didn't rescue my friend from those particular investments, she is more careful now going forward.

You are dealing with powerful forces of denial, so I wouldn't want to get into a comparison of your services vs the bad adviser's.  Frankly, the other guy who can sell that crap is by definition a better sales agent than you are since you are probably (I hope) incapable of selling that kind of stuff. Rather, I would suggest educating him or her by finding third party information such as Jason Zwieg's WSJ articles on annuities and the FINRA databases for looking up adviser violations. Tell your clients who own annuities that many annuities, especially complex ones, are problematic before mentioning that some advisers who sell them often get into legal problems. Lastly, I would offer your services to your client should they ever decide that that particular annuity they own, may not be meeting their financial needs.  If your client is open to admitting a mistake, they will appreciate your help.  If they don't want to learn this about their investment, your soft approach will not offend them, and you guys will implicitly agree to never bring up the topic again.
« Last Edit: August 11, 2019, 06:49:41 PM by NoCalledStrikes »

Cigarbutt

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Re: Should I tell a client they’re working with a swindler?
« Reply #15 on: August 09, 2019, 07:30:11 PM »
I’ve found myself in an tough spot.
I think I'll ultimately bring the issue up with my client genuinely out of concern.
Here is some contrarian advice.
What is the scope of your relationship with the client?
I assume it is professional but do you have a specific mandate or are you involved as an investment adviser with a wide mandate, including explicit suitability issues?
The scope of the relationship defines your duty of care and loyalty.
You have asymmetric information and you wonder if you should share this information even if other interested parties (including your client) may conclude that your intent is related to a potential conflict of interest...
You know that annuity contracts can be shady and you think that the other member of your profession is probably disloyal but you are not sure of that.
I would be careful if your situation implies getting involved in a professional relationship that is beyond your specific mandate. Your client sharing this info is not the same as your client disclosing this information with mandated and specific questions about the product or the professional selling the product. If the definition and the context of your relationsip allow it, you could answer questions and provide objective information related to suitability and asset allocation and point the potential risks related to annuity contracts and to the possibility to verify the credentials of the involved professional (I assume this is public record in your jurisdiction).

Just imagine that your client, during a meeting, 'discloses' a new personal relationship and you happen to have very unfavorable reviews from reliable sources about this new person. Would you get involved in that relationship for the good of the client?