Common Deceptive Investment Practices
Many investors are deceived by some so-called financial advisors who are looking to promote self-interests and profits. May brokers and financial advisors are really sales representatives who are paid fees and commissions to sell investment products. Within the investment world, unethical brokers and financial advisors have caused significant financial losses to trusting investors. A securities litigation attorney sees deceptive advisors charged with billions of dollars in fines every year for cheating or defrauding investors. Common deceptive investment practices include:
Investment advisors may claim to have legitimate designations and certifications, but many hold fake credentials. Real advisors are registered representatives and investment advisors, while fake advisors have access to numerous combinations of certifications that can be bought, not earned. Advisors often use numerous initials after their names to promote professional expertise because most investors don't take the time to validate credentials.
Misleading Investment Advice
Many so-called advisors give investors misleading investment advice. Advisors who are not properly trained and licensed often lack adequate knowledge about investment opportunities, conflicts of interest, and risks, and they rarely perform due diligence. Most investors rely on their brokers or advisors for expert advice, and misleading or bad investment advice results in thousands of investment claims every year.
Undocumented Sales Claims
What investors don’t know about their brokers or advisors creates some of their biggest financial risks. Selecting an investment advisor based solely on verbal information is dangerous. Investors should choose advisors based on documentation, rather than undocumented claims and sales pitches. Unregulated advisors who have numerous complaints are not required to disclose them to clients, and they often are allowed to retain their licenses. A securities litigation attorney often sees convicted criminals who obtain securities licenses.
Excessive Fees and Commissions
When an advisor puts his/her own self-interest above the client's, it's often driven by the desire to maximize fees and commissions. Recommending high-cost investments, using borrowed money for stock investments, and excessive trading of a client's account all result in increased fees and commissions for brokers and advisors.