Asset Allocation

Most competent and reliable financial professionals understand that the biggest contributors to success are proper asset allocation and portfolio diversification. Your stockbroker or financial advisor has a fiduciary duty to you, as their investor, which places a significant amount of responsibility on them. If you believe you may be the victim of improper asset allocation and your broker didn’t act in your best interest, you may be able to file a claim for damages. 

Investor fraud is something that happens every day, and the complexity of the financial networks and systems makes fraud tempting for many people. There are many different types of claims that can fall under investor fraud, such as churning and failure to execute certain orders, but one that few people know about is linked to asset allocation. It’s important to act fast if you have been the victim of investor fraud because there are time limits involved, but an expert attorney can help you file quickly and effectively.

What Is Fiduciary Duty?

A fiduciary duty is a duty to act in the best financial interest of a specified person or party. This is not just an informal designation, the Securities and Exchange Commission, or SEC, has records and registrations for all financial advisors and planners that indicate their status as fiduciary. Whether or not your broker or advisor has a fiduciary duty to you will likely determine if you will be able to file a claim for any improper use of your assets.

Your broker’s or advisor’s fiduciary status will determine their legal liability or culpability, in the event that something goes wrong with your investments. In the case where your broker or advisor holds fiduciary responsibility for you, failing to act on your behalf or in your best interest when closing out certain trades or orders.

• Types Of Asset Classes
• Cash
• Foreign Currency
• Cryptocurrencies
• Stocks
• Bonds
• Commodities
• Futures
• Real Estate
• Natural Resources

Could You Be the Victim Of Asset Allocation Misconduct?

Many people wonder if they might be the victim of asset allocation misconduct, but don’t necessarily have all the information they need to confirm. This is where discussing the details of your case with a local expert like the attorneys at TorkLaw can pay dividends for your claim. We know what constitutes misconduct, and what fails to qualify. 

Your financial advisor is paid to look at the big picture of reaching your wealth or investment goals, and they should have coherent and intelligent strategies for helping you to reach those goals. There will be an inherent amount of risk in any type of investment, but that risk should be reasonably offset by the expected return. Each type of asset and investment will have a unique risk-return profile.

While there is no single right way to allocate investment assets, there are decidedly wrong ways. Your investment advisor should know how to handle your investment portfolio, and your attorney at TorkLaw can help evaluate your investment history and trends that might mean misconduct. Enough red flags may indicate that your advisor was not properly or competently diversifying your portfolio.

If your advisor or brokerage firm was negligent in the structuring of your assets, resulting in insufficient asset allocation, you may have a valid claim for negligence or misconduct if you should suffer losses as a result. Since asset allocation is so important when investing and has a direct bearing on the returns that can be expected, brokerage firms, financial advisors, and other investment advisors have a legal duty to offer a well-thought-out, deliberate distribution of your assets.

Claims Dealing with Diversification

Diversification is a well-known and sound investment practice that distributes investment assets or capital among various securities or financial instruments. Diversification is why funds composed of many different stocks will generally do far better, on average, than any single, random stock. It is the reason that you never want to have all of your assets invested in one particular industry or sector, and the reason you want a wide variety of investment types. The primary goal is to hedge against losses in one specific company, sector, or industry if the market should make a correction.

Portfolios that are properly diversified are much more resilient to changing market conditions and are quite capable of providing some form of return in nearly any market condition. Diversification can protect your portfolio from catastrophic losses in all but the direst economic circumstances. Poor diversification looks like relying heavily on the subprime mortgage industry in 2007 or relying too heavily on the tech sector before the dot-com crash at the turn of the millennium. 

The risks that stem from a lack of diversification grow daily. With the economic uncertainty, and even turmoil that the markets have seen recently, failing to be properly diversified can spell disaster for the average investor.

Risk Management Strategies

The most effective risk management strategies act along the premise of adjusting your risk tolerance based on the investor’s life stage. For example, the asset allocation plan for your 20s and 30s is going to differ drastically from the asset allocation strategy for your 50s, 60s, and beyond. 

Your financial advisor has a distinct legal obligation to spend any necessary time educating themselves about your financial situation and your goals, so that they can recommend the optimal asset allocation strategy, to maximize your potential returns in a way that aligns with your personal risk tolerance. 

TorkLaw Can Help with Your Claims for Improper Asset Allocation

If you feel that you may have been the victim of asset allocation misconduct or impropriety, reach out to the legal team of TorkLaw and discuss the details of your case in complete confidentiality. Your initial consultation will be completely free, and there will be no fee unless we decide to take your case. 

In many situations, we can take cases on contingency, which means we only get paid if you recover financial compensation, and our fees may be able to qualify for inclusion in your damages. Reach out today and speak with a local expert, and start your securities fraud claim for asset allocation misconduct.