Brokerage Firms Abandon Small IRA Account Customers With the Emergence of the Fiduciary Rule – An Accident Waiting To Happen?

STOCKBROKER LAW - Posted on January 17, 2018

The recently enacted Fiduciary Rule requires that brokerage firms managing the accounts of IRA customers are required to adhere to a prudent man/prudent investor investing guidelines in order to project IRA accounts from unnecessary losses due to stock market volatility, downturns and risky investments. These initiatives, in turn, have seen brokerage firms require that all IRA accounts be platformed and managed on a wrap account/management fee basis, typically 1% per year.

With the arrival of the Fiduciary Rule, many brokerage firms have been telling existing IRA account holders that if they are unwilling to agree to paying the 1% annual management fee charge, they will no longer be permitted to have an individual broker (i.e. a live human being) assigned to their accounts. Many firms have also been demanding that these same abandoned IRA customers sign off on a form, expressly making known their desire not to have their accounts managed. From there, many brokerage firms have been assigning the accounts to call center type consolidated facilities without the benefit of providing individual, licensed brokerage advice and assistance on accounts.

So where does all this leave longstanding clients whose accounts have been pushed to this call center model? Some feel that abandoned accounts will ultimately sustain drastic losses as a result of their abandonment, without any substantive advice. Indeed, we think this is an accident waiting to happen.

We offer a free initial consultation to investors who feel they may have been victimized in the financial markets. For a free initial consultation contact the Law Offices of Timothy J. O’Connor at (518) 426-7700.