Forbes recently published a list of America’s Top Wealth Advisors. This list is published annually and rates thousands of advisors based on asset under their management, revenue, experience, and compliance. The Malecki Law team noticed that some top managers have several disclosure events in their BrokerCheck record. BrokerCheck is a free tool from FINRA (Financial Industry Regulatory Authority) that helps investors’ research brokers, investment advisors, and their firms.
Here is a list of a few of the top advisors with disclosure events for unauthorized trading, unsuitability, and more. (Not all top advisors on their list had reported events or all of the above reported events on BrokerCheck and the list below does not comprehensively include all top advisors with such disclosure events).
Lyon Polk ranked at #24 has 4 disclosure events between 1992-1994, according to Broker Check, they include allegations by customers of alleged unauthorized trading, misrepresentation, unsuitability, excessive trading, violation of commissions discount agreement. Each of these customer dispute was settled. In 1992, Lyon Polk was the subject of a regulatory disciplinary action, where he was sanctioned with suspension, censure, and a fine amounting to $27,500, per BrokerCheck.
Charles Zhang at #16 who manages $3.4 billion in assets has 9 disclosure events in his record. Some of the allegations made by customers include poor advice, unreasonable performance expectations, insufficient disclosure, unsuitable recommendations, misrepresentation and mismanagement, as per Broker Check.
Patrick Dwyer of Merill Lynch Private Banking & Investment group with $2.7 billion in asset management has 7 disclosure events, including some allegations for unsuitable investment recommendations. One such allegation made by a customer involved margin trading.
As advocates of investor rights, we encourage people to look into advisors past history before engaging their services. We also believe that such industry rankings should reflect past instances of allegations of misconduct and unauthorized trading.
An University of Chicago and University of Minnesota report published earlier this year, 7 percent of financial advisers have been disciplined for misconduct. In many instances, advisers who are fired for misconduct get hired by firms with higher tolerance for misconduct and emphasis on revenue generation at the cost of disciplinary actions. Therefore, many become repeat offenders. One of FINRA’s 2016 priorities is to address the issue of firm culture that results in such behavior.