Broker's get Contests and Prizes-the Client may not Win / Rocket Insurance.US

Broker’s get Contests and Prizes-the Client may not Win

When it comes to investing your money-make sure you know what you’re getting your money into and why. This New York Times article cautions against blindly jumping into new products.

According to the Massachusetts securities regulator, Morgan Stanley ran a sales contest to give incentives to its brokers to sell securities-backed loans to its wealth management clients in Massachusetts and Rhode Island.

The sales contest tripled the number of these loans in those states in 2014 and 2015, the regulator said in a complaint this month. Whether the bank’s clients actually needed such potentially high-risk and costly products is not clear.

The complaint against Morgan Stanley came just weeks after Wells Fargo was fined $185 million for opening thousands of sham accounts for its mostly middle-class customers.

Here’s what the article says you can do to protect yourself.

Andrew Stoltmann, a lawyer in Chicago who has brought more than 1,000 cases against brokers, suggested that investors adopt a degree of cynicism.

“You have to always question why the broker is calling you with a new product or a different nontraditional investment,” Mr. Stoltmann said. “If they do call, be extremely wary.”

He suggested that investors ask the brokers to send something in writing with their recommendations, even if it’s just an email. That, he said, is one way to have proof of what you were being told.

“These brokers love to sell the sizzle and downplay the risk,” he said. “But they get real nervous when they have to put pen to paper.”

Another strategy is to ask the broker why a certain product benefits you, said Gavin Morrissey, managing partner at Financial Strategy Associates, a financial services firm.

“I know some people wouldn’t be comfortable answering that,” Mr. Morrissey said. “Clients should continuously ask good questions of the adviser. ‘I don’t understand the portfolio. Why do you have me in this alternative allocation?’ Or they say, ‘Why did you sell me this thing? I don’t know what it does.’”

Even then, there is a risk that a client might not understand the answer. Mr. Morrissey said. That is why it is important that wealthy clients have their advisers, accountants and lawyers speaking to one another.

“If you have someone who is unwilling to inform those other professionals,” he said, “the question is, why wouldn’t you share something like that?” He added, “Wouldn’t it be a good idea to know what they’re doing?”

To read more see New York Times

About the Author Dan Keil