The Churning of A Client’s Account Cost Her Financial Advisor Six Figures $$$

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Elder Financial Abuse Attorney

Many seniors are taken advantage of by a small but aggressive group of financial salesmen.  It always starts the same: a phone call to an elderly person, often a lonely widow or widower with a large savings account.  These predators will sell life insurance policies, annuities and other financial products to generate substantial commission checks.  Most of the time, these policies are completely inappropriate for the client causing them serious financial harm.  This form of exploitation is called “churning.”

In one reported case, an older woman wanted to build an investment portfolio so that she could leave more money behind to her children and grandchildren. She told the broker that she wanted conservative and safe investments.  After a few years, one of her children noticed that her accounts had lost significant sums of money because of these “investments.”

The court found that her accounts had in fact been churned by this unethical broker. They looked at three different factors.  First, they had to determine whether the trading in the account was excessive.  The stocks in her accounts were held for a short period of time and sold off quickly, so that the broker could buy others.  Some unethical brokers do this to generate more commissions for themselves.

Second, the court determined that the broker had nearly total control over the account.  Basically, the victim followed all of his advice because she was persuaded by him that this was in her best financial interests to do so.  This advice ended up costing the victim tens of thousands of dollars from her savings accounts.

Third, the court found that the broker acted with a reckless disregard for the victim’s interests.  The broker clearly disregarded the investor’s interests because he engaged in short-term, speculative trading practices.  These are the sort of risky investments that the investor specifically told him she wanted to stay away from.  She wanted conservative investments with moderate growth – safe investments.

In this case, all three elements were proven.  The defrauded investor received the amount of money that she would have had if the broker never managed her portfolio.  In this case, between punitive and compensatory damages, the plaintiff received over a six-figure judgment in her favor.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.