Financial Advisors Can Be Held Accountable for Investment Loss

Investment loss is a common risk that all investors face. Sometimes an investor may not be aware of the risks, and other times the investment will fail to meet expectations.

Imagine you lost $200,000 in the stock market because your financial advisor made a lousy investment. In this situation, your financial advisor could be liable for damages. Still, there are many caveats to consider before taking legal action.


This article will cover how a broker can be held accountable if they recommend an investment that doesn’t work out.

What Is a Fiduciary Duty?

A fiduciary duty is a responsibility between two parties, known as the fiduciary and the beneficiary. The fiduciary duty is supposed to act in the best interest of the beneficiary, which is usually an investor. The National Association of Securities Dealers (NASD) defines a fiduciary relationship is one where the professional has “a power or influence over another person’s investment decisions.”

Investors can be considered beneficiaries because they depend on their brokers for advice on investments. Fiduciaries are legally obligated to give advice that is not self-interested. They are also required to avoid conflicts of interests, which can include owning specific securities that are not appropriate for the client’s needs.

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Why Do Financial Advisors Need to Be Held Accountable for Their Investment Advice

Financial advisors need to be held legally accountable for losing investors’ money.

The Financial Industry Regulatory Authority, or FINRA, is a government-authorized not-for-profit organization that oversees U.S. broker-dealers. They work to protect investors and ensure the market’s integrity. We work every day to ensure that everyone can participate in the market with confidence.

Here’s a list of FINRA Rules and Regulations. Investors, on the other hand, need to be wary of their advisor’s actions since they could lose a lot of money.

For example, it’s hard to prove that your financial advisor acted negligently if they have been managing investments successfully for other clients over a long period and only one client has experienced significant losses. Furthermore, even if you can show negligence on behalf of the professional who handled your account, you may not be able to recover any money from them. After all, this is their job, and they should expect some losses and gains from investing! Therefore, when considering whether or not to take legal action against a broker, you need to compare the likelihood of success with the amount gained from doing so.

In short, Investors should consider all risks before investing in an investment that their advisor has suggested. After this, if the investor feels as though they have been wronged by their advisor’s investment decision, it is a good idea to contact a legal professional for further information.

How Can You Tell if Your Advisor Is Acting in Your Best Interest or Not?

There are many ways to tell if your advisor is acting in your best interest or not. Some of these include:

  • Does your advisor seem to have a conflict of interest?
  • Are you being given advice that seems to be self-interested?
  • Is the advice that is being given appropriate for the situation at hand?
  • Have other investors experienced significant losses by following your advisor’s investment advice?
  • Has your advisor previously lost any considerable amount of money by following their advice?

If you answered yes to any of these questions it is likely your financial advisor may not be someone you should trust with managing your investments. This doesn’t necessarily mean that taking legal action against this broker will result in success. However, the investor should consider all options before investing their money.

Last but not least, the investor needs to be able to show that they were indeed affected by this person’s advice. Many factors go into investing, so proving these claims can be challenging. The best thing an investor can do is keep accurate records of all meetings with the broker and any telephone conversations, as well as any phone records that prove contact between these individuals.

Questions to Ask Before Hiring an Advisor

Below are some questions that are important to ask before hiring an advisor.

  • Does the advisor have a fiduciary duty?
  • What services does this person provide?
  • How much do these services cost? Are there any other fees or commissions that may apply?
  • Do you work on commission only, or do you also offer a fee for service?
  • How do you make your money? Do you invest in any of the investments that you recommend to clients, or are these investments selected by someone else?
  • What types of investment experience do they have?
  • Who is this person’s supervisor? Can I speak with their supervisor directly if I have questions about my account representative?
  • Will you be working with other people at the company, or will my account be handled entirely by this individual?
  • What percentage of your clients were able to stay with the program long enough that they achieved their desired goals?
  • How much money has been invested in stocks or bonds from all of your clients this year? Which assets do you personally invest in the majority of the time when managing my portfolio? What would happen to my investments if I died before I retired?

There are many other questions that you may want to ask; however, this list should provide a starting point and can help to avoid any unpleasant surprises in the future. It would help to write down these questions and take them with you to your meeting. That way, you will always be able to remember what was discussed and can make a note of anything that takes place during the appointment.


Financial advisors need to be held accountable for their investment pieces of advice because they are considered fiduciaries. This means that there is a higher degree of trust and responsibility placed on them when investing clients’ money.

When choosing an investment plan for yourself or your clients, take the time to find out about their background. If you are not satisfied with the answers you get from them, consider looking for another advisor. Also, if you need to file a complaint against your advisor, consider contacting a self-regulatory organization for brokers and financial advisors. For more information about consulting services to broker-dealers and investment advisors, check out this link regarding Broker-Dealer and Investment Advisor Practice.

Your financial advisor should be held to a high standard. If you’re not happy with your investment decisions, it’s time to find someone who is willing to work for you and listens closely to what you want from them. You deserve nothing less than the best!



Comments 2

  1. Eli Richardson says:

    Recently, my sister and I decided it’d be good for us to start investing in something to make our money grow with time, so we’re currently looking for an advisor to help us. We’re glad you talked about what questions we should ask before hiring a financial advisor, so we’ll keep them in mind when we interview our options. We appreciate your tips about asking which services a financial advisor could offer us.

  2. Brian Sokoloski says:

    Have been requesting a new respectful financial advisor at CIBC in Langley Bc Canada for 3 years and constantly being ignored by upper management have been dealing with the bank at various locations for 30 years..portfolio has gone down since February 2022 canceled all financial advisor services in June 2022 very Sickening how was treated after paying thousands of dollars over the 7 years with portfolio and was always hesitant to release fine details regarding the portfolio and expenses other than the monthly brief statements …advisor was always laughing when portfolio was down very disgusting plain and simple

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