Posts Tagged ‘brokers’

Who keeps track of whether financial advisers give good advice?


By Russ Van Arsdale, executive director Northeast CONTACT
Posted Jan. 25, 2015, at 12:18 p.m.

We’ve all heard stories about people who lose money through bad investments.

Some put money into schemes advanced by friends or family members. Other people might get “tips” from a variety of sources that promise their advice will lead to a “sure thing.” Still others might overhear investment advice from a professional but misunderstand and invest unwisely.

Smart investing is critical when planning for retirement; that’s why many people turn to professionals for investment advice. However, not all advisers are created equal, just as not all investments are right for everyone who has money to invest.

Stockbrokers and some financial advisers are held to a “suitability” standard. They recommend investment products considered “suitable” for a given client. Another standard is termed “fiduciary,” meaning the adviser must act in what’s believed to be the client’s best financial interest.

A range of investment products might meet the suitability standard, with some returning more in fees to the adviser than others. It’s in the adviser’s interest to recommend a product that will earn the pro a higher fee; even if it’s not the best fit for the client, it’s still “suitable.”

Maine’s Department of Professional and Financial Regulation cautions investors that “brokers may recommend investments that appear suitable but may not be optimal for investors’ objectives.” The PFR website goes on to say, “Because of the manner in which they are compensated, it is possible for brokers to have incentives to sell financial products that may not entirely align with clients’ goals.”

With that bit of background, we come to a proposal by the U.S. Department of Labor to update rules governing financial advising. Current rules were written during the Ford administration. Since then, total investments in IRAs, 401(k) plans and other defined distribution plans have swelled and will reach $7.3 trillion by 2016. That’s an estimate by the Securities Industries and Financial Markets Association, or SIMFA, a trade group representing securities firms, banks and asset managers.

The Labor Department has for several years proposed changing the definition of fiduciary regulation; the department said recently it will withdraw its current proposal and issue a new one shortly. A coalition of consumer and labor groups is calling for rules requiring all financial advisers to put clients’ interests first when giving retirement advice. On its website, the coalition charges that the financial advising industry “wants to continue slicing off large pieces of that pie by selling retirement investments with hefty costs, poor returns, and high risks.”

SIMFA calls the last proposed rule “overbroad” and said it would “limit investment choices and drive up costs for the individuals it is intended to protect.”

SIMFA says 149 U.S. representatives and 34 senators have written to the Department of Labor and the Office of Management and Budget in opposition to the proposed regulation and the expected new proposal.

Meanwhile, the Financial Planning Association, Certified Financial Planner Board of Standard Inc. and National Association of Personal Financial Advisers are calling for certification of financial planners who operate “with fiduciary accountability and transparency.”

This coalition argues that the “title ‘financial planner’ should be recognized as distinct from sales persons – and held to corresponding competence and ethical standards similar to those required of a CPA, doctor or lawyer.”

When choosing a financial planner, ask “How will you be compensated? What are your qualifications? What is your general philosophy on investing? What kind of client turnover have you had in recent years?”

When asking for advice on investing your money, you want to feel comfortable with answers to those and related questions.

The state of Maine licenses broker-dealers and prosecutes violations of securities laws. Learn more at

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit or email



Investigators looking into unlicensed investment sales — Bangor Daily News


By Russ Van Arsdale,
Executive Director, Northeast Contact

Posted June 12, 2011, at 8:15 p.m.

We’ve urged caution in the past when making investments. Now, as the economy remains less than vibrant, some sellers are cutting corners and hoping that their promises of large, quick returns will overpower our common sense.

The old adage still applies: if it sounds too good to be true, it is.

Maine’s Office of Securities is actively pursuing cases in which unlicensed sellers operate in the state. Office investigators are also looking for licensed sellers who may be selling investment products that are not registered in the state.

In a news release last week, Securities Administrator Judy Shaw said her office has reached a consent agreement targeting the unlicensed sale of an unregistered investment product. A consent agreement is a legal stipulation that, while the signer admits no legal wrongdoing, he will not do it again.

In this case, Jesse Bean of Calais sold a one-year promissory note to a 78-year-old Maine resident. The promissory note was not registered in Maine. Bean convinced the buyer to finance the deal by surrendering a Bankers Life and Casualty Equity Indexed Annuity (EIA) Bean had sold the resident a year earlier for more than $51,000.

The resident agreed, even though it cost a 10 percent surrender fee. Bean assured the resident that not only would he recover the surrender charge within a year, but also he would make a lot more money if his funds were invested in a Genesis note rather than the Bankers Life EIA.

A couple of things were wrong with those promises. The value of the property that Genesis bought using the resident’s money was less than what the resident invested; also, the loan was not fully collateralized. Although he had been told his money would pay only 70 percent of the closing costs, those funds covered all the closing costs; so, Genesis did not contribute 30 percent of the purchase price as promised.

In signing the consent order, Bean agrees not to associate with any investment adviser, issuer or broker-dealer for two years. Instead of a civil penalty, he’s begun making restitution of $5,000 to the heirs of the Maine resident.

Shaw notes that most investment firms and their employees have good track records and act in their investors’ best interests. She says when that is not the case, her office will go after violators aggressively. Last year, Shaw’s office ordered restitution totaling over $6.4 million to investors and got another $164,000 restitution without taking formal action.

Shaw urges all investors to check the license status of anyone who offers investment products for sale and to make sure the investment product is properly registered in Maine. You can check online at or by calling 877-624-8551(TTY: 888-577-6690).

Last month, the Office of Securities announced the launch of a searchable database of stock brokers and investments advisers. Prospective buyers can check to see if a broker or adviser has any history of disciplinary action. The database is maintained by FINRA, the Financial Industry Regulatory Authority. Find it online at

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for more information, write: Consumer Forum, P.O. Box 486, Brewer 04412, go to, or email

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