Suing Your Stockbroker: Weekend Reading
Great Story on Bad Broker Advice in today's New York Times.The article ponders over the bear market of 2000 and whether or not brokers and the money hungry brokerage arms they work for were to blame. The fact of the matter is that everyone lost money during the crash. Granted, some lost more than others, but overall, the bear market put a dent in most accounts. Clients can take their brokers to arbitration, but the process is costly and time consuming. The man the article covers won $500,000 back but had to give half of it to lawyer and arbitration fees. Goliath never goes down easy.
The article also illustrates how clients must diversify their asset holdings and seek truly independent advice. Your good friend from high school should NOT be your broker. The Merril broker at the heart of the article had his client wrapped up in stocks 100% -- no bonds, no mutuals, no cash or money market account -- nothing. Anyone with a basic understanding of personal finance 101 or asset allocation would've bailed out of an entirely equity-driven portfolio.
Today, Merril has ensconsed itself in a new "trusted guidance" marketing campaign, not uncommon for a financial services industry that's currently leaning towards being everything to everyone.
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