Your Guide to Protecting Your Investments: What Every Investor Should Know

Why This Matters to You

If you’re investing your hard-earned money, you deserve to know what can go wrong—and how to spot trouble before it costs you. This guide breaks down the most common types of financial advisor misconduct in plain English, so you can protect yourself and your family’s financial future.

The Most Common Problems Investors Face

When Your Advisor Makes Trades You Didn’t Approve

Here’s what happens: You check your account statement and see transactions you never authorized. Maybe your advisor executed trades without calling you first, or pressured you into signing papers you didn’t fully understand.

Real warning signs:

– You discover trades in your account that you don’t remember discussing
– Your advisor gets defensive when you ask about specific transactions
– You’re being pushed to sign a “discretionary trading agreement” without a clear explanation of what it means

What you need to know:** Unless you’ve signed specific paperwork giving your advisor permission to trade without checking with you first

Wrong Investments for Your Situation

What this looks like:** Your advisor recommends investments that just don’t fit your life. Maybe you told them you’re retired and need steady income, but they’re putting you in high-risk options. Or you mentioned you’ll need the money in a few years, but they’re suggesting illiquid investments you can’t easily sell.

Real-world examples:

– You are 65 and conservative with your money, but your advisor is day-trading with your retirement savings
– You said you need access to your cash for a home purchase next year, but they’re recommending investments with heavy penalties for early withdrawal
– Your advisor keeps suggesting investments you can’t explain to your spouse

Watch out for:

– Feeling confused or uncomfortable about where your money is going
– Pressure to invest in complex products “you just need to trust me on”
– Major losses on investments that were supposed to be safe

Your protection:  Your advisor is legally required to understand your goals, timeline, and risk tolerance—and only recommend things that actually make sense for you.

Too Many Eggs in One Basket

The problem: When too much of your money ends up in one stock, one industry, or one type of investment, you’re taking on way more risk than you probably realize.

Why it’s dangerous: If that one investment tanks, you could lose a huge chunk of your savings. It’s the financial equivalent of betting your entire retirement on one horse.

What to look for:

– More than 10-20% of your portfolio in any single investment
– Your advisor keeps recommending the same type of investment over and over
– All your stocks are in the same industry (like tech or energy)
– Your advisor waves off your concerns about having “all your eggs in one basket”

What you can do:

– Spread your money across different types of investments (stocks, bonds, real estate)
– Within each type, diversify further (different companies, different sectors, different countries)
– Check your statements regularly—don’t just assume your advisor is diversifying
– Ask your advisor to explain your actual diversification, not just tell you “it’s fine”

Excessive Trading That Benefits Your Advisor, Not You

What’s happening:  Your advisor is making lots of trades—not to help your portfolio grow, but to generate commissions for themselves.

Red flags:

– Your account shows constant trading activity
– You’re paying fees that seem high compared to your account balance
– All this trading doesn’t match what you discussed (you wanted a “buy and hold” strategy)
– Your account is barely growing or actually losing money, even when the market is up

A good rule of thumb: If your annual fees are eating up more than 5-10% of your account value, or if you’re seeing dozens of trades every month when you signed up for long-term investing, start asking questions.

Being Lied to or Kept in the Dark

What this means: Your advisor either tells you things that aren’t true, or conveniently forgets to mention important details that would affect your decision.

Examples you might encounter:

– “This investment is guaranteed”—when it’s actually not
– Making risky investments sound completely safe
– Promising returns that are unrealistically high
– Not mentioning all the fees you’ll be paying
– Failing to disclose conflicts of interest (like getting extra commissions for certain products)

Remember: You have the absolute right to complete, honest information. If your advisor is hiding things or stretching the truth, they’re breaking the rules—and potentially costing you money.

Getting Charged Too Much

The issue: You’re being hit with fees that are way higher than they should be, or you’re discovering layers of costs you never knew about.

What to watch for:

– Fees that seem much higher than the standard 1-2% for managed accounts
– Surprise charges that weren’t explained upfront
– Multiple fees stacking on top of each other (management fees, fund fees, transaction fees, etc.)
– Bills that don’t match what you originally agreed to

Take action: Don’t be embarrassed to ask for a complete breakdown of every single fee you’re paying. If the explanation is confusing or the numbers seem high, get a second opinion.

When Your Advisor Forges Signatures

This is serious stuff: Your advisor signs your name, a family member’s name, or someone else’s name on documents without permission. This might include using electronic signatures without authorization.

Why it matters: This isn’t just bending the rules—it’s fraud. It completely violates the trust you’ve placed in your advisor and breaks fundamental industry regulations.

If this happens to you: Don’t wait. Contact your firm immediately, file a complaint with FINRA, and strongly consider talking to a securities attorney. This is one of those situations where you need to act fast.

Your Advisor Asking to Borrow Money

What’s wrong here: Your advisor asks you for a personal loan or wants to borrow money from you. Unless you’re immediate family, this is almost always prohibited.

Why there are rules about this: It creates a massive conflict of interest. How can your advisor give you unbiased financial advice when they owe you money? And it opens the door to exploitation, especially if you’re elderly or vulnerable.

Be alert for:

– Direct requests to “borrow” money
– Suggestions that you invest in your advisor’s personal business ventures
– Being asked to write checks directly to your advisor instead of to legitimate investment firms

How to Check Out Your Advisor

Using BrokerCheck (It’s Free and Easy)

1. Go to brokercheck.finra.org
2. Type in your advisor’s name or their CRD number
3. Look at their full history:

– Where they’ve worked and for how long
– Any complaints filed against them
– Disciplinary actions they’ve faced
– What licenses and qualifications they have

What Should Concern You:

Multiple complaints: One complaint might be nothing—or it might be something. But if you see a pattern of complaints, that’s a red flag waving at you.

Getting fired for misconduct: If your advisor was terminated “for cause” or in connection with rule violations, that’s extremely serious.

FINRA suspensions or bars: This means regulators have actually disciplined them for breaking the rules. Major red flag.

Large settlements: If your advisor has paid out substantial settlements to resolve complaints, it suggests serious problems occurred.

What Those License Abbreviations Mean

You might see these letters after your advisor’s name. Here’s what they actually mean:

– **Series 7 (General Securities Representative):** Can sell stocks, bonds, and mutual funds
– **Series 65 or 66 (Investment Adviser Representative):** Can give fiduciary investment advice (meaning they’re legally required to put your interests first)
– **Series 6:** Limited to mutual funds and variable annuities
– **SIE (Securities Industry Essentials):** Basic knowledge exam—the starting point

**Important note:** Having lots of licenses doesn’t automatically make someone trustworthy or competent. But your advisor absolutely must have the proper licenses for whatever they’re selling you.

Red Flags That Should Make You Stop and Think

Trust your gut if you notice any of these:

Your advisor seems annoyed when you want to review your statements carefully

– You hear phrases like “guaranteed returns” or “absolutely no risk”
– There’s pressure to invest right now, today, without time to think it over
– You don’t understand an investment even after asking multiple times for an explanation
– Your advisor gets defensive or irritated when you ask reasonable questions
– You’re having trouble accessing your account or getting clear information
– Statements don’t arrive on time, or when they do, they show unexpected activity
– Your advisor suggests keeping certain investments “just between us” and not telling family members
– You feel talked down to or dismissed when you voice concerns

How to Protect Yourself (Practical Steps You Can Take Today)

Before You Invest a Single Dollar

Do your homework on the advisor:

– Look them up on BrokerCheck
– Search their name online to see what comes up
– Ask for references and actually call them

Understand what you’re buying:

– If you can’t explain an investment in simple terms to your spouse or friend, don’t buy it
– Take time to read and understand what you’re signing
– Don’t let anyone rush you

Get crystal clear on costs:

– Ask about every fee—management fees, transaction costs, fund expenses, everything
– Get the total cost estimate in writing
– Compare with industry averages

Put everything in writing:

– Verbal promises mean nothing if things go wrong
– Save all emails, documents, and agreements
– Take notes during important conversations, including dates and what was discussed

While Your Money is Invested

Stay involved with your account:

– Review your statements every single month—actually read them
– Log into your account online regularly
– Compare your statements to what’s happening in the market

Question anything that seems off:

– There are no stupid questions when it comes to your money
– If something doesn’t make sense, keep asking until it does
– Don’t feel bad about challenging your advisor

Keep good records:

– Save all statements (even if they’re online, download and keep them)
– File all correspondence
– Document phone conversations with notes

Watch for changes:

– Notice if your advisor’s behavior changes
– Pay attention if your account is underperforming compared to similar investments
– Be alert to any pressure to make changes to your beneficiaries or account structure

If Something Feels Wrong

Document everything immediately:

– Write down dates, times, and details of concerning conversations
– Save all relevant emails and documents
– Screenshot account pages if you’re worried they might change
– Keep a timeline of events

Contact the firm’s compliance department:

– Do this in writing (email or certified mail)
– Keep copies of everything you send
– Note who you spoke with and when
– If they don’t respond appropriately, escalate

File a regulatory complaint:

– Don’t wait—file with FINRA as soon as you suspect a problem
– You can also file with the SEC and your state securities regulator
– This creates an official record and may help others

Talk to a securities attorney:

– Many offer free initial consultations
– They can tell you if you have a case
– Most work on contingency (no upfront costs)
– They can guide you through the process

Where and How to File a Complaint

Official Places to File:

FINRA (Financial Industry Regulatory Authority):

– Website: finra.org/complaint
– Phone: (301) 590-6500
– This is usually your first stop

SEC (Securities and Exchange Commission):

– Website: sec.gov/complaint
– Phone: (202) 551-6551
– Especially for more serious fraud cases

Your State Securities Regulator:

– Find yours at nasaa.org
– They often take a more personal approach
– May have additional remedies under state law

What to Include in Your Complaint

Make it as complete as possible:

– Your advisor’s full name and CRD number
– The firm’s name and location
– A detailed description of what happened (who, what, when, where, why)
– A clear timeline of events
– Copies of relevant documents (statements, emails, agreements)
– The amount of money you lost
– What you want to happen (investigation, recovery, discipline)

Important Timing

Don’t put this off. Most complaints must be filed within 6 years of when the problem occurred, or within 2 years of when you discovered it. The sooner you file, the better your chances of recovering your money.

Understanding Your Legal Options

Arbitration: What It Is and What It Means for You

Most brokerage accounts require arbitration through FINRA instead of going to court. Here’s what that means in practical terms:

The process:

– Usually faster than the court system (though still often takes a year or more)
– Less formal—you don’t need to follow all the technical court rules
– Neutral arbitrators (usually one to three) hear both sides and make a decision
– That decision is final—you generally can’t appeal it later

The good and the bad:

– Good: It’s typically faster and less expensive than traditional litigation
– Good: Arbitrators often have securities industry experience
– Bad: You give up your right to go to court
– Bad: You also give up your right to a jury trial

Working with a Lawyer on Contingency

Many securities attorneys work on contingency, which means:

No money out of pocket:

– You don’t pay anything upfront
– The lawyer only gets paid if you win or settle
– If you lose, you typically owe nothing for their time

How it works:

– Standard fee is usually 33-40% of whatever you recover
– The percentage might be higher if your case goes to arbitration rather than settling
– You should get a free consultation first to see if you have a case
– Everything should be explained clearly in a written agreement

What to expect:

– Your lawyer will gather evidence, file claims, and represent you in arbitration
– They’ll handle communication with the firm and their lawyers
– Most cases settle before going to a full hearing
– The process typically takes months to over a year

What You Might Recover

If you win your case or reach a settlement, you could get:

Your losses back:

– The money you lost due to the misconduct
– This is usually the main component

Lost profits:

– What you would have earned if your money had been invested properly

Interest:

– Compensation for the time you’ve been without your money

Attorney’s fees:

– Sometimes (but not always) the firm has to pay your legal costs

Expert witness costs

– Occasionally included in larger cases

Questions You Should Ask Your Advisor (Before You Invest):

Don’t be shy about asking these questions. Any advisor who won’t answer them clearly isn’t someone you want handling your money:

1. “Are you a fiduciary?”

– This means they’re legally required to put your interests ahead of their own
– If they say “sometimes” or hem and haw, that’s a concern
– Get the answer in writing

2. Exactly how do you get paid?

– Commissions? (They get paid when you buy/sell)
– Fees based on assets? (They get a percentage of what you have invested)
– A combination?
– Who pays them—you, the company, or both?

3. “What are ALL the fees I’ll be paying?”

– Management fees
– Trading costs
– Fund expenses
– Any other charges
– Ask for the total estimated cost as a percentage of your investment

4. “What are the risks of this specific investment?”

– Make them spell out what could go wrong
– Ask about worst-case scenarios
– Find out what happens if you need your money early

5. “How quickly can I access my money if I need it?”

– Are there penalties for withdrawing?
– How long does it take to liquidate?
– What are the tax implications?

6. “Have you ever been disciplined or had complaints filed against you?”

– Be direct about this
– You can verify their answer on BrokerCheck
– If they lie, that tells you everything you need to know

7. “Why is this investment specifically right for MY situation?”

– They should reference your goals, timeline, and risk tolerance
– Generic answers are a red flag
– They should be able to explain it in terms of your life, not just investment theory

8. “What happens if I disagree with your recommendation?”

– Good advisors respect your right to say no
– Be wary of anyone who pressures you or makes you feel stupid for questioning them

Remember:  If your advisor won’t answer these questions clearly and directly, or if they make you feel bad for asking, find a different advisor.

Resources That Can Help

Educational Resources:

– FINRA Investor Education: finra.org/investors (tons of free, unbiased information)
– SEC Investor Information:** investor.gov (official government resource)
– FINRA Investor Helpline: (844) 574-3577 (free, confidential assistance)

Check Your Advisor:

– BrokerCheck: brokercheck.finra.org (official database of all registered advisors)

File Complaints:

– FINRA Complaint Center: finra.org/complaint
– SEC Complaints: sec.gov/complaint
– State Regulators: nasaa.org (find your state regulator)

Find Help:

– Securities Attorneys: Public Investors Advocacy Bar Association, Many offer free consultations.

The Bottom Line: You’re in Charge

Here’s what you need to remember:

You have every right to understand where your money is going — Don’t let anyone make you feel stupid for asking questions

You have the right to ask as many questions as you need — Keep asking until things make sense

You have the right to say “no” — To any investment, at any time, for any reason

You have the right to complain if something’s wrong — And you should, both for yourself and to protect others

You have the right to seek help recovering your losses — If you’ve been harmed by misconduct, you can fight back

Your advisor works for you—not the other way around. You’re the boss in this relationship. You’re trusting them with your life savings, your retirement, maybe your kids’ college fund. That trust comes with the right to demand honesty, competence, and transparency.

If something doesn’t feel right, it probably isn’t. Trust your instincts. Your money, your rules.

What to Do Right Now

If you’re currently working with an advisor:

1. Look them up on BrokerCheck today
2. Review your last three months of statements carefully
3. Make sure you understand what you’re invested in
4. Verify that your investments match your goals and risk tolerance

If you suspect a problem:

1. Document everything
2. Contact the firm in writing
3. File a complaint with FINRA
4. Call a securities attorney for a free consultation

If you’re looking for a new advisor:

1. Check multiple advisors on BrokerCheck
2. Interview at least three candidates
3. Ask all the tough questions listed in this guide
4. Get everything in writing before you invest

Don’t wait until small problems become big losses. Take action now to protect your financial future.

Nicholas J. Guiliano has more than thirty years experience representing investors. He is “AV Rated,” (Highest Rating in Both Legal Ability & Ethical Standards) by Martindale Hubbell, and has also been selected as a Martindale Hubbell Client Champion. Mr. Guiliano has an AVVO Rating of 10 (Superb), has received the AVVO Five Star Rated Client’s Choice Award, and for more than a decade, Nicholas J. Guiliano has also been honored as one of America’s Most Honored Lawyers (Top 10% Nationwide).

The Guiliano Law Group, P.C. national practice exclusively representing investors in claims against brokerage firms for securities fraud, the sale of unsuitable investments, defective financial products, breach of fiduciary duty, and the failure to supervise. FINRA Securities Arbitrations. Contingent fee. Free Consultation.

We handle all cases on a contingency fee basis meaning that there is no cost or obligation, unless we are able to make a recovery for you, and there is never any charge for a free consultation. Contact Us.