investor alert released by the Financial Industry Regulatory Authority (FINRA), the securities regulator warned investors about “customer
advisory centers” that are becoming increasingly common in the securities
industry. These offices ostensibly act as call centers for discount brokers
with customers who self-manage their own accounts. But the persons working
there often receive financial incentives for pushing products and services
on the callers.
According to FINRA, these call centers often raise a number of compliance
and supervisory concerns, including:
- Poor supervision of accounts from the center’s representatives.
- Failure to inform clients about the expenses and costs of options offered
and a failure to inform clients about the availability of different classes
of mutual fund shares.
- Omissions and misrepresentations of vital pieces of information, including
sales charges, expense ratios, historical income and yield information,
portfolio makeup and a fund’s investment objectives. If a switch
is recommended and advertised as having no cost to the investor, or other
phrasing along those lines, take extra care – in some cases , these
switches may be subject to Contingent Deferred Sales Charges (CDSCs) and
can result in higher annual fees depending on when they were sold.
- Mutual fund switches that, depending on your situation, may be unsuitable.
- IRA rollovers that are claimed to have no fees or be free.
- Not gathering information about the suitability of customers.
- Aggressive sales tactics.
FINRA recommends the following tips when dealing with a customer advisory center:
Reach out to your brokerage firm or representative if you receive a notice
that your account either has been or will soon be transferred to an investment
or call center to ask questions about what will or may change in your
account. Some questions you may consider asking:
- Will I pay the same fees and commissions on services provided by the call center?
- What services will the call center provide? Are they different from the
services I received before?
- Will my new representative be able to recommend all types of investments?
- Will I have an individual representative focused on my account, and will
they understand my investment objectives and experience, my account and
will they know me personally?
- Take care if the call center representative recommends that you move your
money from your current investment into another, especially if they recommend
that you move your money into an investment product run by their firm.
- Ask the representative what kind of compensation they will receive whenever
they recommend a particular investment product.
- Find out whether or not you can develop a relationship with an individual
representative at the call center. Whenever a representative tries to
sell you a product or provides recommendations for your investments, take
down their full name and do a background check to ensure they are properly
- Inform every representative you speak with about information pertinent
to any recommendations they may, like your investment objectives, financial
circumstances and risk tolerance. Give them updates on your situation
as changes occur in your life.
- Understand the expenses and costs associated with each mutual fund share
classes to help you decide whether or not switching from one to another
could benefit you.
- Understand everything about mutual funds recommended to you by a representative,
like any expenses and fees, investment objectives and the name of the
fund. If you are ever recommended to switch to a fund outside of the family
of funds you currently invest in, ask for a side-by-side comparison of
fees to make sure that you won’t find yourself in a financially
What Can I Do If I Need Help?
If you lost money after being switched to a customer advisory center or
suspect that you were the victim of investment fraud, contact our investment
fraud attorneys at Meyer Wilson to discuss your case. We have spent nearly
two decades providing clients with the knowledgeable and passionate legal
representation they need to recover their losses. Our law firm has recovered
hundreds of millions of dollars in verdicts and settlements on behalf
of our clients.
Fill out our online form to start out with a free case evaluation, or give us a call at one of our four offices located across the country
to discuss your cases with a member of our firm today.