“She needs the money for care”: My 103-year-old grandmother’s advisor bought 5 bank stocks. She lost $300,000. Can I sue?

By Sydney Barrett Last updated Sep 8, 2023

By Quentin Fottrell

“She gave me access to her finances so there would be no surprises when she died.”

Dear Quentin,

I am the trustee/executor of my 103 year old grandmother. She is alive and well for the most part. Lately she has been giving me access to her finances so there will be no surprises when she dies.

I just checked her bank statements and found that her advisor bought five bank stocks worth hundreds of thousands of dollars last year, just in time for her to lose her money.

Your loss is around $300,000. I broached the subject with her and she said she was too tired and didn’t have the courage to fight it anymore. However, she is very worried as she needs the money for care.

The advisor is the son of the advisor my grandmother used decades ago. I can’t understand why such purchases were made for her at 102 when there were much safer investments.

I’m wondering if I have a way to challenge this company. I have your authority. If so, can I do that now?

The grandson

Dear grandson,

As trustee/administrator of your grandmother’s estate, this occurred under your supervision and you should act immediately to avoid exceeding any statute of limitations. It seems inconceivable that he would make such an investment. It’s time for a forensic examination. What was the agreement between the consultant and your grandmother? Is there a paper trail? Did he ask her to sign documents? Did he pressure her or act without her knowledge?

Every investment carries some risk, and the S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq COMP suffered significant losses last year. The burden of proof would be on you if you sued your grandmother’s financial advisor on her behalf. But from what you’ve said, it’s difficult to justify buying individual stocks for someone her age – if he bought them. Did he actually buy it? Or did he record this as an investment loss? There are many questions that need to be answered.

“Unfortunately, this isn’t the first time I’ve heard a story similar to yours,” says Larry Pon, a certified public accountant based in Redwood City, California. “Instead of suing the agent, you should file a complaint with the agent’s manager. Every broker.” The office has a compliance officer who ensures its brokers comply with regulations. They have remedial action procedures in place. They can reach an agreement with you to avoid reporting to regulators or negative publicity. The broker also has insurance to cover these losses.”

Not all asset managers are fiduciaries – professionals who are required to act in the best interests of their clients under the Investment Advisers Act of 1940. Find out whether your grandmother’s advisor is a fiduciary — rather than, say, a broker-dealer — and whether they are a member of the Financial Industry Regulatory Authority. Certified financial planners have similar codes of ethics. It’s time to sound the alarm.

There is a good reason why consultants and planners belong to professional associations. According to law firm Haselkorn and Thibaut, Finra operates the Office of Dispute Resolution, which acts as an arbitrator/mediator for members and investors in such matters. “These claims are silent and are typically faster, more efficient and less expensive than many alternative forums available,” it said.

“Check that she has given the agent permission to do whatever he wants,” Pon adds. “You need to change these permissions. If you don’t get a satisfactory answer, contact a lawyer to take legal action and transfer the account elsewhere with an investment manager who will prudently invest your grandmother’s money. You can also contact the prosecutor’s office on elder abuse. They deal with cases of this type and can prosecute the broker.”

So what is negligence? Gibbs Law Group provides some examples of possible negligence. “A good financial or investment advisor should understand your circumstances as an investor and recommend only appropriate financial products for your age, investment objectives, experience and desired level of risk,” the law firm says.

Your grandmother’s advisor should, in theory, be able to stand behind his investment choices. “But negligent advisors sometimes trick you into making risky or unsuitable investments in order to earn higher commissions,” the law firm notes. “If for some reason your financial advisor has placed you in an unsuitable investment, you may be entitled to financial compensation.”

It appears that your grandmother’s advisor did not take sufficient steps to diversify her portfolio to protect against excessive losses. He has been enjoying the “halo effect” for far too long. Presumably he inherited the company from his father, shared his last name, and shared many things with his father, except apparently his good judgment. Buy five individual stocks for a 102-year-old woman? My gut reaction was: What was he thinking? Something doesn’t smell here.

There will likely be counterarguments and bureaucracy. Expect your grandmother’s counselor to mount a defense, however weak or aggressive that defense may be. For example, he could argue that he bought these shares for the estate. And financial institutions have been known to find reason not to recognize a power of attorney in certain situations – for example, if the account was held in a trust account or it is not a durable power of attorney.

Finally, most investment contracts contain an arbitration clause. Finra and the Securities Industry and Financial Markets Association (Sifma), a trade group representing securities firms, banks and asset managers, argue that arbitration saves all parties valuable time and money. and helps to facilitate smaller claims from private investors. Good luck with your investigation and I urge you to take action to prevent this from happening to anyone else.

Readers write to me with all sorts of dilemmas.

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“She needs the money for care”: My 103-year-old grandmother’s advisor bought 5 bank stocks. She lost $300,000. Can I sue?

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“She needs the money for care”: My 103-year-old grandmother’s advisor bought 5 bank stocks. She lost $300,000. Can I sue?

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