Do investors have rights?
It’s a fair question. After all, it’s their money. But the financial industry is filled with fast-talking rogues who might make you think twice about that. Ponzi schemes and outright fraud are only the tip of the iceberg. There are all sorts of ways for advisors can take advantage of the folks with capital that can fall short of what’s illegal.
First, investors have a right to honest, objective, competent advice. That seems like a no-brainer, but it can be harder than you think. Honest advice means that the advisor needs to know the laws—securities laws, tax laws, fiduciary laws—that govern the instruments under consideration. In today’s complex world, there are frequently conflicting issues that need to be sorted out.
For example, is it legal to own a limited partnership in an IRA? How about real-estate? Sometimes the answer can surprise you. It may be legal, but there can be significant tax implications—especially if you or a relative use the real estate that the IRA holds.
Honesty isn’t just telling the truth. It also means being clear and forthright. Anything less is simply unacceptable.
Douglas R. Tengdin, CFA
Chief Investment Officer