Broker Complaints

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How Do I File a Complaint About a Financial Advisor?

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Raymond James agrees to pay $15 million to settle SEC investigation

As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the.

Unfortunately, statistics indicate that thousands of investors file complaints against financial advisors, stockbrokers, and other financial professionals each year. Many of these complaints result in formal action against the broker or financial advisor, and depending on the case, the investor can even be compensated for financial losses sustained as a result of misconduct or fraud. If you believe that you, your husband or wife, or your small business has been financially harmed because your financial advisor committed fraud or deliberately acted against your best interests, it may be appropriate to file a formal complaint. Continue reading for an explanation of when to consider filing a complaint, how to file a FINRA complaint, and how a FINRA arbitration lawyer can assist you.

What is FINRA, and How Can it Help with Your Financial Advisor Complaint?

FINRA is an acronym for the Financial Industry Regulatory Authority, which is a non-governmental regulatory organization based in Washington, D.C. The purpose of FINRA, which monitors more than 630,000 individual brokers and over 3,700 securities firms nationwide, is to help oversee and enforce compliance with financial industry regulations among members.

When an investor has a financial issue with his or her broker or brokerage firm, the investor can look to FINRA for legal recourse. Specifically, the investor can file a complaint against the financial advisor or stockbroker, and/or file a claim to begin a dispute resolution process known as “FINRA arbitration.” The latter may culminate in reimbursement for the losses incurred – if, that is, the investor can successfully prove that fraud occurred before an arbitrator or panel of arbitrators.

A FINRA law firm can make this process easier, while increasing the likelihood that you will be compensated for your losses, by:

  • Drafting and reviewing your complaint for completeness and accuracy.
  • Preparing you for what to expect at each stage of the process.
  • Ensuring that no legal deadlines are missed.
  • Ensuring that your legal rights are upheld throughout the process.
  • Building a legal strategy that maximizes your ability to recover.

One of the most fundamental ways an attorney can assist you is by helping to determine whether you have grounds for filing a complaint. Depending on the circumstances, it may be appropriate to file a FINRA complaint, or even take more aggressive actions, if you experienced any of the following issues with your financial advisor or stockbroker:

How to File a FINRA Complaint for Investors

FINRA’s website provides a succinct overview of FINRA complaints for investors and fraud victims:

“If you believe that a sales person, brokerage firm or other industry professional has treated you unfairly, contact the firm to see if you can resolve the issue. If you are still not satisfied with the firm’s response, you can file a complaint with FINRA.

Through its Complaint Program, FINRA investigates complaints against brokerage firms and their employees. FINRA is empowered to take disciplinary actions against brokers and their firms. Sanctions may include fines, suspensions, a barring from the securities industry or other appropriate sanctions.”

The FINRA website is the fastest, simplest, and most reliable starting point from which to file a complaint. To begin the process of filing a FINRA complaint, follow these six steps:

  1. Navigate to the FINRA website, or FINRA (dot) org.
  2. Hover over the “Have a Problem?” link in the header, then click on “File a Complaint” in the dropdown menu. This will bring you to a new page.
  3. Click the “How to File a Complaint” link. Again, a new page will open.
  4. Scroll down until you see two red buttons. Click the button that says “File Online Complaint” for fastest processing. It may take a few moments for the complaint form to load.
  5. Complete the first page of the form with as much detail as possible. Do not submit any false information.
  6. Follow the prompts to complete the rest of the online complaint filing process.

FINRA Arbitration Attorney Representing Investment Fraud Victims

Filing a complaint can be a good starting point. However, if your objective is to be compensated for your financial losses, filing a complaint may not be sufficient – even if FINRA punishes the broker as a result of your complaint. As FINRA itself cautions, “There can be no assurances that any action taken by FINRA will result in a payment or return of funds or securities to you even where formal disciplinary actions are taken and sanctions imposed.”

Making a complaint about your insurance provider

Step 1: Address the problem with your agent, broker or company representative

If you have a concern about your policy, claim, or any dealings with your insurance company or broker, contact the company. Every company has an internal complaint-handling process which is posted on their website.

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When filing a complaint, remember to:

  • state the facts, such as why you think there is a problem and what you’d like to happen
  • provide copies of documents, such as brochures, account statements, contracts and medical information, if needed
  • keep a record of who you talked to and what was said
  • ask for a letter that clearly states your insurer’s final decision regarding your complaint

Step 2: Contact regulators or ombudsman if needed

If you’re not satisfied, you can make a formal complaint in writing to your insurance company’s internal ombudsman. This is a person who’s responsible for conducting an independent investigation of your complaint within the company.

Make a formal complaint in writing to your insurance company to your insurance company’s internal ombudsman.

Include the following:

  • your name
  • your policy number
  • the name of your insurance agent or broker
  • the details of your complaint

Provincial and territorial insurance regulators oversee the licensing and conduct of insurance agents and brokers. Each province and territory has its own insurance regulator and all insurance companies must follow the rules and regulations of the province or territory in which they carry out business.

Step 3: Contact a third-party if needed

If your complaint has still not been resolved, contact one of the following organizations to get a third-party review:

Brokerage Company

What Is a Brokerage Company?

A brokerage company’s main duty is to act as a middleman that connects buyers and sellers to facilitate a transaction. Brokerage companies typically receive compensation by means of commissions or fees that are charged once the transaction has successfully completed. Nowadays these might be paid by the exchange or by the customer, or in some cases both. Because many discount brokerages have instituted zero-commission trading, they make up for this loss of revenue in other areas, including getting paid by the exchanges for larger quantities of order flow. For example, when a trade order for a stock is executed, an investor pays a transaction fee for the brokerage company’s efforts to complete the trade.

The real estate industry also functions using a brokerage company format, as it is customary for real estate brokers to collaborate, with each company representing one party of the transaction to make a sale. In this case, both brokerage companies divide the commission.

A brokerage company may also be called a brokerage firm, or simply a brokerage.

Brokers may work for brokerage companies or operate as independent agents.

Understanding Brokerage Companies

In a perfect market, where everybody had full information and could act quickly and correctly on that information, there would be no need for brokerage firms. In reality, however, there is less than perfect information, opacity, and asymmetric knowledge. As a result, buyers don’t always know who the sellers are and which is offering the best price. Likewise, sellers are in the same position. Brokerage companies exist to help their clients match the other side of a trade, bringing together buyers and sellers at the best price possible for each, and extracting a commission for their services.

In the financial markets, several different types of brokerage firms offer a wide range of products and services. Here is a brief description of the three major types, starting with the most expensive option. We will go into greater detail on each below.

  • Full-service brokerage: A full-service brokerage company provides a professional financial adviser who manages all investment decisions and provides ongoing advice and support. Such brokerages, with their high-touch services, are the most expensive option.
  • Discount brokerages:Discount brokers were once brick-and-mortar operations, but are now most often online platforms that allow do-it-yourself (or self-directed) investors to make their own trading decisions for lower commissions. Recently, there has been a push toward zero trading commissions for ETFs or even all products on several self-directed online platforms. These brokerage companies may tout relatively low flat fees for trades in television, internet, and radio advertising.
  • Robo-advisors: Automated investment advisory platforms, or robo-advisors, are a relatively new form of a digital financial advisor that offers investment management services carried out by algorithms with minimal human intervention at a very low cost. Several robo-advisors offer zero commissions or fees, and you can start with as little as $5 in many cases.

Investors have a range of options when choosing a brokerage company. The type of services a person requires depends on their level of market knowledge, sophistication, risk tolerance, and comfort in trusting others to manage their money.

Brokerage commissions erode returns over time, so investors should select a company that provides the most economical fees for services provided. Before opening an investment account, a customer should compare fees, products, benefits, customer service, reputation, and the quality of services provided.

Key Takeaways

  • A brokerage company primarily acts as a middleman to connect buyers and sellers to facilitate a transaction.
  • Brokerage companies typically receive one of two types of commission: a flat fee or a percentage of the transaction amount.
  • Brokerage companies come in several types, offering a range of products and services at a range of costs and fees.

Types of Brokerages

The amount you will pay depends on the level of services you receive, how personalized they are, and whether they involve human beings rather than computer algorithms.

Full-Service Brokerage

Full-service brokerages, also known as traditional brokerages, offer a range of products and services including money management, estate planning, tax advice, and financial consultation.

Some traditional, full-service brokerage companies also offer discount brokerage services and robo-advisor platforms. The difference is the breadth of services and cost.

These companies also offer up-to-date stock quotes, research on economic conditions, and market analysis. Highly trained and credentialed professional brokers and financial advisers work at these firms and may form personal relationships with their clients. Some traditional, full-service brokerage companies also offer discount brokerage services or robo-advisor platforms.

Traditional brokerages charge a fee, commission, or both. For regular stock orders, full-service brokers may charge up to $10 to $20 per trade, but many advisors are switching to a wrap-fee business model, in which all trades and advice come under an all-inclusive annual fee—typically 1% to 2% of assets under management (AUM). Many full-service brokers seek out affluent clients and establish minimum account balances required to obtain their services, often starting at six figures or more.

Discount Brokerage

A discount brokerage charges less than a traditional brokerage but may provide fewer comprehensive services and products, and lack the personal relationship found with a full-service advisor; the depth and quality of discount brokers’ advice often depend on the size of an investor’s account.

Several full-service companies do offer a lower-cost discount brokerage arm, as well. These types of companies are able to charge a lower commission by having their clients conduct their own research and trades via computerized trading systems, either web-based or through a mobile app.

The first discount brokerage is often attributed to Charles Schwab in the 1970s and 1980s. Since the advent of online trading in the late 1990s, commissions for discount brokers have fallen dramatically, to where they now average around $4 to $5 per trade. Today, most discount brokerages are also online brokerages. A recent trend is for ETF trades executed through online brokers to carry zero commission. Other online brokerages such as Robinhood, which only offer access via a mobile app, are pioneering zero commissions on all trades.

Robo-Advisors

Starting in the 2020s, robo-advisors are a class of digital-only online investment platform that uses algorithms to implement trading strategies on behalf of clients in an automatic manner. Most robo-advisors subscribe to long-term passive index strategies that follow the rules of modern portfolio theory (MPT), although several robo-advisors now allow clients to modify their investment strategy somewhat if they want more active management.

The allure of robo-advisors is not only the automation but also the very low fees and low account balances needed to get started. In many cases, robo-advisors actually charge no annual fee, zero commissions, and you can start with just a few dollars.

Some robo-advisors have now started employing human advisors whom clients can consult, but these advisors often are unable to actually change the recommended portfolio allocation generated by their algorithms. Furthermore, access to an advisor will come with a higher fee, typically 0.25% to 0.50% of AUM per year—which is still far less than that of a traditional broker.

Independent Versus Captive Brokerage

It’s also important to know whether your broker is affiliated only with certain companies or can sell you the full range of choices. You should also find out whether they hold to the fiduciary standard or the suitability standard.

Independent Brokerage

Independent brokerages are not affiliated with any mutual fund company, but function similarly to a full-service brokerage. Typically, these brokers can recommend and sell clients products that are more likely to be in their best interests because they are not tied to one company. Registered investment advisors (RIAs) are the most common type of independent broker found today. They are required to hold to the fiduciary standard, meaning that they must recommend the investments most in the client’s best interest—and not their own (meaning, a fund with an especially good commission for the broker who sells it). It’s best to choose an advisor who upholds the fiduciary standard and not the lesser suitability standard.

Captive Brokerage

Captive brokerages are affiliated with a specific mutual fund or insurance company and have contracts with specific providers to sell only their products. These brokers are employed to recommend and sell the range of products that the mutual or insurance company owns. Such products may not be in the client’s very best interest compared with other options.

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