When people buy a house or car, they might pick at every detail in the agreement, carefully examine it and question what the other party says.
But when they open an investment account with a financial adviser, they often blindly sign any document in front of them, potentially giving away their rights and putting themselves in a difficult position if a legal dispute comes up.
"The fraud, negligence and abuse that leads to people getting ripped off by Wall Street begins at the point of opening up an account, not the first trade," said Dale Ledbetter, a Fort Lauderdale, Fla.-based securities lawyer and co-author of "How Wall Street Rips You Off And What You Can Do to Defend Yourself," published by Ledbetter Enterprises.
"The broker will give you a choice of investment objectives -- growth, income, tax advantage or speculation -- not capital preservation," he said. "He will ask you to rate those objectives from 1 to 4.
"Even if you rate speculation as your No. 4 objectives and you lose money in the account, the broker will say, 'Look, you did check speculation.' If you check growth, they can take carte blanche to engage in highly risky transactions."
While the book by Mr. Ledbetter and Connie Becker is meant to show Main Street investors how to avoid becoming victims, another new book, "The Financial Professional's Guide to Communication: How to Strengthen Client Relationships and Build New Ones," by Robert L. Finder Jr. gives financial advisers a few pointers on how to do a better job for their clients.
Mr. Ledbetter and Ms. Becker advise that investors can avoid being added to Wall Street's sad list of casualties by not going into a relationship with an investment firm thinking the institution and its employees are friends. The authors provide a series of horror stories, which either serve as cautionary tales or some measure of consolation that other investors have experienced similar problems.
They point out that for investors to recover money they must show a link between what the broker did and the losses that occurred.
The theme of the book is that it is easier to avoid losing money than it is to try to get it back.
It also debunks the myth that the Financial Industry Regulatory Authority, or FINRA, provides meaningful protection for investors against Wall Street negligence and abuse. (The term "Wall Street" in this book refers to broker dealers who are registered with FINRA.)
"We have to be psychological counselors as much as lawyers because we deal with people who have lost everything they have to Wall Street," Mr. Ledbetter said. "We have an 80-year-old client who just went back to work as a hostess in a restaurant. We've represented lots of athletes whose [wealth] was wiped out, and people whose kids can't go to college and their retirement dreams ended all because they trusted a Wall Street firm."
What "always comes as a great shock to clients is they have signed away their rights to sue a broker in court," Mr. Ledbetter said. "They instead agree to arbitrate disputes before FINRA panels, which is an industry-owned trade association for the securities industry."
Meanwhile, Mr. Finder, a 30-year veteran of the financial services industry who is based in St. Louis, has written a book for financial professionals to grow their practices by honing their listening, speaking and presentation skills. It was published by Pearson's FT Press, and he is donating all the royalties to United Way.
The most successful advisers, according to Mr. Finder, are the ones who clearly define what they do; who listen to their clients without judgement or challenge; who speak with confidence, poise and clarity; and who practice their communication skills on a regular basis.
Many financial professionals don't even know they lack proficiency in the art of listening, speaking and providing advice.
"They oversimplify their presentations by talking down to clients," Mr. Finder said. "They overcomplicate by speaking over their heads. They overwhelm clients by including excessive levels of details.
"Even more surprising, they are not even aware of how their mannerism and appearance -- as well as what they say -- impact their listeners. And then they wonder why they did not win a new account or lost an existing one."
The advice offered in "The Financial Professional's Guide To Communication" does not only apply to financial professionals. It can be useful for any sales or professional field in the arts, sciences, academia or any occupations where it is important to get ideas across.
"You separate yourself from ordinary people by mastering a subject matter and relaying it in a simple concise manner," he said.
He hopes his book will help financial professionals focus on what matters most to clients.
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