Know Your Customer

The maxim in the retail securities business is “Know Your Customer.” It requires that retail brokers have reasonable grounds for believing recommendations are suitable for customers given their resources and Investment objectives.

Financial consultants must use due diligence to determine the Investment objectives and risk tolerance of each customer.

In the typical “non-discretionary” account those Investment objectives are “growth Income” or “total return” [growth and income]. A customer’s risk tolerance is usually measured as “conservative,” “moderate” or “aggressive.” Some forms also include the category “speculation.”

With the increasingly common “managed accounts,” investment management responsibility is delegated to an investment manager or managers who manage the account consistent with a particular management “style.” However, asset allocation studies have concluded that the mix of stocks, bonds, and cash has much more to do with performance than any particular manager. Market timing and security selection play a minor role. It is critical that loss management policies are tied to customer knowledge.

If an investor cannot tolerate a significant loss of principal, it is incumbent upon the financial advisor/broker to know this, and to take proactive steps to protect a portfolio. Recent advances in an account executive’s ability to place stop losses and limit orders in the OTC markets make it indefensible to over expose a retired customer’s principal to market risk. The representative must alert the customer to market risks to which the portfolio is exposed.

Call for a Free Consultation!

From its offices in Connecticut and Florida, the Law Offices of Howard M. Rosenfield has been representing investors nationwide in securities arbitrations and mediations for over 30 years. Please call now, toll free, for more information if you believe that you suffered an investment loss: (860) 677-4334.

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Howard Rosenfield is truly a life saver. After months of working with my financial advisor, I found out he was making risky investments without my knowledge. When I discovered how much money I lost, I thought there was nothing I could do. Howard explained all the difficult terms and what exactly my financial advisor did wrong. If it wasn't for Howard, I would never have recovered my losses and would be under extreme financial distress to this day. J.
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Howard’s experience and advice throughout this ordeal was invaluable and reassuring. The law in general is complicated, difficult to understand and very personal. Financial misappropriation is even more personal but Howard’s years of experience and calm demeanor helped keep me calm, focused and moving forward. For anyone in need of a knowledgeable and experienced Investment Recovery Attorney I strongly recommend Howard. Laura
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I was filled with anxiety and stress when I selected Attorney Howard Rosenfield to represent me. Instantaneously, I felt comfortable and at ease. Attorney Rosenfield listens attentively to the facts and asks questions and competently reiterates and verifies the accuracy and completeness of my statements. Perseverance, trustworthy and superb legal and communication skills mark Attorney Rosenfield to be one of the best in his field of law. Helen