Associated Press:

Stephen Meadows, a retired architect, lost more than $100,000, a fifth of his original investment, according to estimates from a lawyer trying to get his money back in arbitration. His broker put him into non-traded REITs that pay large commissions to those selling them, but are difficult for investors to unload in a pinch.

Meadows says his broker never told him about the commissions, typically 7 percent of what’s invested, or risks. But he rejects the notion he should have known better.

“If people want me to design a building for them, I don’t expect them to know how to do that,” says Meadows, 63.

When he wanted to sell one of the REITs, he was told he could only get back 4 percent of what he had invested. His former broker, John Martin, citing the arbitration, says he can’t talk about the case or his commission.

Apparently this confusion surrounding whether or not your financial advisor works for you or their firm will continue forever. Until either a universal standard of care is adopted or financial salespeople become forced to identify themselves as such, as Michael Kitces is proposing.

The behavior documented in the below article is not emblematic of the majority of brokers. But it is an unfortunate side effect from the lack of awareness people have about whether or not someone’s legally required to put their best interests first. The public assumes too much, too naively, and when stuff like this happens, they are shocked. Education would help, but so would a less confusing set of regulations / incentives.


Small investors blame losses on brokers they once trusted (Yahoo Finance)


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