SEC Whistleblower Lawyer Blog
As volatile as the market is these days, clients still should not lose sight of the value of their investment advisor. And understanding their value proposition goes beyond if an advisor gives them sound financial recommendations. It also means that advisors should be charging clients fair rates for their services.
Unfortunately, for too many advisors, that just isn’t the case. They may overcharge clients through fee manipulation, lack of disclosure or excessive trading. So let’s discuss some red flags that may indicate if your firm is overcharging clients.
Overcharging Or Undisclosed Fees
In a “Risk Alert” published by the Securities and Exchange Commission (SEC), the SEC warned that some advisers were overbilling fees. Some did so included switching the metrics for valuing the assets in a client’s account to a different method than was in the client’s advisory agreement. For example, under the agreement, the advisor should charge based on a client’s average daily balance, but, instead, they charge fees based on the market value of the assets at the end of the billing cycle.
Other techniques advisors used to inflate fees include:
- changing the billing cycle (i.e., from quarterly to monthly)
- demanding pre-paid fees that aren’t correctly pro-rated
- using the wrong fee rate
- omitting rebates
- incorrectly applying discounts
Excessive Trading Is Also A Concern
Another way to overcharge clients is to bill them for extra work they didn’t need to do: For unscrupulous advisors, that can include churning, an illegal practice that describes when advisors make excessive purchases and sales of securities solely to drive up their commissions and without regard for the investor’s investment goals.
Signs that an advisor may be engaging in churning include when there is unauthorized trading on clients’ accounts or if the advisor is frequently making “in-and-out” trades that are inconsistent with clients’ goals.
Has Your Broker Churned Your Account
If you are concerned that your firm is overcharging clients, the experienced attorneys at Silver Law Group and the Law Firm of David R. Chase are here to help. They can explain possible legal avenues available to you as a whistleblower or how to pursue a claim for damages. For a free, confidential consultation, email us or call us today at (800)975-4345.