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How risk tolerance and investment unsuitability are tied together

On Behalf of | Jul 28, 2023 | Representing Investors |

You want to put your money to work for you and see it grow, not squirrel it away. Investing in the financial markets can be highly rewarding, giving you an opportunity for more wealth creation and true financial security.

But what happens when your investment advisor puts you in an unsuitable investment without clarifying your risks?

Financial advisors are supposed to look at investment suitability for their clients

“Unsuitability” refers to a situation where a financial advisor recommends an investment that is inappropriate for a particular client based on such factors as their age, unique financial situation and investment objectives. Collectively, these things describe each individual investor’s “risk tolerance.”

Some financial advisors purposefully put older, conservative investors in high-commission, high-fee products, promising that these investments (which are also high-risk in nature) are a “sure thing.” Their fraud is purposeful because they’re more interested in what they can make off their clients, not their clients’ futures.

In other cases, financial advisors are simply negligent. They may not take the time to do a risk assessment profile on a client and take even less time making sure that the client actually understands the stakes.

As an investor, it’s important to be an active participant in all your investment decisions. Going into the process with a clear understanding of your own risk tolerance level can help you steer the conversation with your financial advisor toward your preferences and goals.

If you have suffered financial losses because your investment advisor was either purposefully deceptive about your investment risks or their negligence caused you to end up with unsuitable investments, it may be time to learn more about your legal options. Professional malpractice is actionable.

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