Client Wishes for Stockbroker Arbitration

Westville, INKaren P. (not her real name) hopes she has the opportunity to file a stockbroker arbitration claim against her financial advisor. Although she may not have been a victim of outright stockbroker fraud, she does feel she was misled into putting her money into mutual funds when she really wanted a money market investment.

"My husband and I went to Edward Jones because we wanted to transfer our money to them," Karen says. "They were local and my husband is not familiar with computer things, so if something happened to me, my husband could take care of the money locally. I emailed a local advisor and told him I was interested in putting our money in a money market. He set up an appointment and we went in.

"I asked him [the advisor] how much it would cost for a money market and he said it wouldn't cost anything. But, he said we wouldn't make as much money as if we went to mutual funds. I told him I had just pulled the money out of cash reserves and wanted the money in a money market. The advisor convinced my husband that the mutual funds were the safest funds possible.

"Then, he said people like me pet their money. He said that means I watch it closely when I should just put the money in and let it go because the market is always up and down. At that point, I should have walked out of his office, but instead I asked how much it would cost to go into mutual funds. He told us that 3 to 3.5 percent would be taken off the top as a one-time fee.

"I was thinking about my husband and thinking that the mutual funds were safe, so I said to go ahead and put the money in mutual funds. We did this in January or February of 2008. I watched the money on the Internet and the money went down, down, down. Then, on September 18, the day of the big drop in the market, I decided we had already lost enough money and couldn't afford to lose any more. I called the advisor and told him to put the money in a money market and we would find another company to handle our money. He tried to talk me out of it, but I told him to put it in a money market right away, which he did.

"We lost $16,000 and some change. We took that money to our bank and put it in laddered cds and money markets. The advisor convinced us that the mutual funds were safe. But, on the Internet and from the advisors on television, I learned that a rule of thumb is that you have no business being in the stock market 5 to 10 years before you need your money. We are 63 and 62 years old. We might need that money when my husband retires in a few years.

"That advisor wanted his commission and didn't care about us. We started out with over $105,000 and we lost $16,000. That's all we had. It's not as much as the millions of dollars some people lost because of bad advice, but it is a lot of money when that's all you have."

Karen says that Edward Jones has so far refused to compensate them for money they lost. "The advisor made his $3,500 commission from us," Karen says. "He said the funds were the best and he had been in the funds for years. He told us his money was where ours was. But, according to that rule from the analysts, we had no business being in the market—we didn't know any better. I feel he took advantage of us for his own gains.

"I hope this story helps other people. I wish I could go into arbitration with this guy. I wish I could have the opportunity to do that. I hope other people have the opportunity to go to arbitration if they go through this."