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Question: “We lost $186,000 of our retirement money. We found out months later when the account had less than $10,000 left in it. I was told the account had no advisers attached to it, which was very unusual. Now what?”
Answer: This is undoubtedly stressful, but advisers shared a step-by-step plan with us on what you can do to try to recover funds. It’s also a good lesson in how important a good, fiduciary adviser can be to investors (you can use this free tool to get matched to fiduciary advisers, from our ad partner SmartAsset, as well as sites like CFP Board and NAPFA. More below on how to vet any adviser you want to hire.)
Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.
“The first thing to do is check with the custodian,” says Brad Clark, investment adviser representative at Solomon Financial. “Assuming it was with one of the larger custodians like Charles Schwab, Fidelity or LPL, they will have a good fraud department to help with this issue. If you believe something was done fraudulently, you should immediately work to secure all other accounts.”
By his assessment, Lukenric Washington, a certified financial planner at Manifest Wealth Management, says getting four to six quarterly statements could tell the story of what happened to your assets.
Beyond that, Alicia Melchor, a financial educator at Alicia Financial, says you should ask for every trade and every fee and review them line by line. “If there really was no adviser on the account, that doesn’t mean no one touched it. Someone still had access and that needs to be clear,” says Melchor.
You’ll also want to check what investments are in the account. “If there were some very speculative investments, it’s possible they lost considerable value in that period of time,” says Clark. “It may not be fraud but simple very poor investments. You’ll want to see the history of the account and when the sudden drop occurred.”
Chad Harmer, a financial planner at Harmer Wealth Management, suggests pinning down when the $186,000 was lost. “If it occurred over a period of months and you were later told the account had no adviser attached, which is unusual, I would escalate immediately to management and/or compliance at the investment firm and request a full walkthrough of the account holdings during that time, all trades and transactions and the specific reason for the volatility or decline,” says Harmer.
You may need to file a formal written complaint to try and recover your funds. “Depending on how the account was set up, if the firm wasn’t completing required KYC [know your client] and suitability updates to confirm the account still matched your objectives and risk tolerance, that may point to a supervisory or suitability failure and potential negligence,” says Harmer.
If you suspect fraud: “Contact FINRA and perhaps the SEC,” says Washington, adding that, “filing a claim could be an option because investment accounts are typically insured by SIPC, similar to bank accounts being insured by the FDIC.” For issues relating to broker-dealer misconduct, filing a report with FINRA is the best course of action, but large scale fraud or issues with public companies warrant a complaint with the SEC.
It’s painful to hear, but there’s no guarantee you’ll retrieve your money. “Going forward, things have to be simple. You should know what your money is in and check it regularly. No one should be surprised months later by a balance the way you were. Accounts should be easy to access and review frequently and when you work with a financial professional, you should be able to check in and ask questions periodically,” says Melchor.
What kind of adviser should you be working with?
This is why working with a reputable adviser can be beneficial. “They can help you make good investment decisions on the front end and then be there to guide you along the way,” says Clark. CFPs offer different arrangements including hourly and project-based engagements, ranging in cost from $200 to $500 per hour or $1,500 to $7,500 per project. This way, you can get answers to specific questions without ongoing support, which can be more cost effective for someone with assets like yours.
CFPs are considered the gold standard in financial planning because they have to complete extensive coursework, pass exams, perform thousands of hours of work-related experience and uphold a fiduciary duty in order to earn their designation. Regardless of credentials, be sure to ask your adviser these questions during the vetting process (you can use this free tool to get matched to fiduciary advisers, from our ad partner SmartAsset, as well as sites like CFP Board and NAPFA.)
Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.
Questions edited for brevity and clarity. By emailing your questions to The Advicer, you agree to have them published anonymously on MarketWatch; they may appear anonymously in other media and platforms.
