When people buy a house or car, they might pick at every detail in the agreement, carefully examine it and question what the other party says.
But when they open an investment account with a financial adviser, they often blindly sign any document in front of them, potentially giving away their rights and putting themselves in a difficult position if a legal dispute comes up.
“The fraud, negligence and abuse that leads to people getting ripped off by Wall Street begins at the point of opening up an account, not the first trade,” said Dale Ledbetter, a Fort Lauderdale, Fla.-based securities lawyer and co-author of “How Wall Street Rips You Off And What You Can Do to Defend Yourself.”
“The broker will give you a choice of investment objectives — growth, income, tax advantage or speculation — not capital preservation,” he said. “He will ask you to rate those objectives from 1 to 4.
“Even if you rate speculation as your No. 4 objectives and you lose money in the account, the broker will say, ‘Look, you did check speculation.’ If you check growth, they can take carte blanche to engage in highly risky transactions.”
While the book by Ledbetter and Connie Becker is meant to show Main Street investors how to avoid becoming victims, another new book, “The Financial Professional’s Guide to Communication: How to Strengthen Client Relationships and Build New Ones,” by Robert L. Finder Jr. gives financial advisers a few pointers on how to do a better job for their clients.
Ledbetter and Becker advise that investors can avoid being added to Wall Street’s sad list of casualties by not going into a relationship with an investment firm thinking the institution and its employees are friends.
The theme of the book is that it is easier to avoid losing money than it is to try to get it back.
It also debunks the myth that the Financial Industry Regulatory Authority, or FINRA, provides meaningful protection for investors against Wall Street negligence and abuse.
What “always comes as a great shock to clients is they have signed away their rights to sue a broker in court,” Ledbetter said. “They instead agree to arbitrate disputes before FINRA panels, which is an industry-owned trade association for the securities industry.”
Meanwhile, Finder, a 30-year veteran of the financial services industry who is based in St. Louis, Mo., has written a book for financial professionals to grow their practices by honing their listening, speaking and presentation skills.
The most successful advisers, according to Finder, are the ones who clearly define what they do; who listen to their clients without judgment or challenge; who speak with confidence, poise and clarity; and who practice their communication skills on a regular basis.
Many financial professionals don’t even know they lack proficiency in the art of listening, speaking and providing advice.
“They oversimplify their presentations by talking down to clients,” Finder said. “They overcomplicate by speaking over their heads. They overwhelm clients by including excessive levels of details.”
The advice offered in “The Financial Professional’s Guide To Communication” does not only apply to financial professionals. It can be useful for any sales or professional field in the arts, sciences, academia or any occupations where it is important to get ideas across.