What to Do

We asked Debra Hayes, managing partner of The Hayes Law Firm which focuses on securities arbitration, to explain some of the do’s for consumers. According to Hayes, “Number one, they need to absolutely understand what product they’re in and what the fees and expenses are that are going into that product. For instance, you might be getting a lovely 8% or 9% return, but if you’re in a product that’s costing you 3%, you’re only earning 5% or 6% and so you really aren’t earning what other people in the market are. You’ve got to ask questions, understand what you’re getting into and hold your broker accountable.

You can also always go and visit with a competitor, go to another broker at another firm and have them give you an opinion. Although, quite frankly, you’re just probably going to get an opinion about them wanting to put you into whatever their hot product is!

You can also go to a state agency. There are insurance agencies and securities agencies in every state. You could contact, for instance, the Texas State Securities Board or the Alabama Securities Commission. Those entities differ by each state as to how aggressive they are. For instance, Joe Borg in Alabama is very aggressive and he will investigate any claims of abuse that anyone would bring to his attention. I’m not as familiar with every other state, but some states are very good about investigating, so that is another route that people could take.”

What NOT To Do

Any do list wouldn’t be complete without a don’t list, and Hayes offered consumers some common sense tips that really hit home. She explained that consumers, “…should not accept these recommendations carte blanche. They should discuss it with other family members, other brokers, an attorney, or their accountant.

They should not believe that they will get something for nothing. In other words, if you are told that you are going to get the highest return, then you need to understand that you’re taking the highest risk. Nothing comes for free, even in the stock market. If you are getting the highest return, you’re taking a tremendous amount of risk and you need to be honest with yourself about that.

You should not, in my opinion, accept any kind of a portfolio that involves being invested 100% in the stock market. I think that every person, especially those who are retiring, needs to have a well-balanced portfolio and that means a mix of bonds and stocks, as well.”

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