• Thu. May 23rd, 2024

Here’s What You Can Do When Your Financial Planner Invests in an Asset Without Your Approval

Hiring a financial planner is an important decision for building your financial future. It can be disconcerting if you find out that someone you’ve given access to your money to has made investments without your approval.

If that happens, there are a few important steps you can take to report what happened. Here’s who you should contact if your financial planner makes trades without your approval, and what types of accounts may allow an advisor to invest without needing your authorization for each trade.

Discretionary vs. non-discretionary investment accounts

It’s important to understand that there is an investment account where your financial advisor can invest without you having to approve a specific purchase or sale. These accounts are called discretionary accounts, meaning a financial advisor can make investment decisions in your brokerage account at their discretion.

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According to the Financial Industry Regulation Authority (FINRA), the only time a broker is allowed to buy or sell stocks, bonds, or other securities without your permission is if you have given them written permission to do so through a discretionary account and the broker’s firm has approved it.

The regulation authority says on its website that “FINRA rules prohibit unauthorized discretionary trading, and doing so is a serious offense.”

In short, an advisor can make trades without your knowledge if you’ve given them express permission in writing and their firm has also approved the account. While available, these types of accounts aren’t common.

On the other hand, a non-discretionary account is when a financial planner needs authorization from you to make trades. These accounts are much more common than discretionary accounts and require the broker to get your permission before each transaction.

What to do if your financial planner invests without your approval

If your financial planner made investments without your authorization, the first thing FINRA recommends is to contact the financial institution your advisor works for. It’s a good idea to do this in writing so you have documentation of your complaint, especially if you’ve lost money.

If you’re not satisfied with the response you receive, it’s time to file a complaint. If your advisor is a broker-dealer — they buy and sell securities and other financial products — then a complaint should be sent to FINRA.

If your financial planner is an investment advisor, mutual fund company, or transfer agent, you should file a complaint with the Securities and Exchange Commission (SEC) or your state securities regulator.

Finally, it may also be a good idea to contact the professional organization your financial planner is a part of. This may involve filing a complaint with the Chartered Financial Analyst (CFA) Institute or contacting the Certified Financial Planner (CFP) Board.

There’s no guarantee you’ll get your money back

If you’ve lost money because a financial planner invested without your consent, there’s unfortunately no guarantee you’ll get that money back, even if you file a complaint with FINRA or another regulator.

Some people may choose to hire a lawyer in these situations. Some law firms have experience with FINRA violations and can help you pursue the best legal avenue for trying to get your money back.

While many financial planners are reputable, it’s always a good idea to do your research beforehand to find the best one. If you’re looking to switch financial planners or need some help picking the right one, here are a few tips on how to find the right financial advisor.

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