‘She needs the money for care’: My 103-year-old grandmother’s adviser bought 5 bank stocks. She lost $300,000. Can I sue?

Financial Planners


By Quentin Fottrell

‘She has been allowing me access to her finances so there are no surprises when she dies’

Dear Quentin,

I am the trustee/executor for my 103-year-old grandmother. She is alive and mostly doing fine. Lately, she has been allowing me access to her finances so there are no surprises when she dies.

I just reviewed her investment-account statements and found that her adviser bought hundreds of thousands of dollars’ worth of five bank stocks last year, just in time for her to lose her money.

Her losses are around $300,000. I brought the subject up with her, and she said she was too tired and didn’t have the fight left in her to contest it. However, she is very concerned, as she needs the money for care.

The adviser is the son of the adviser my grandmother used decades ago. I can’t understand why these kinds of purchases were made for her at 102 years old when there were much safer investments to be made.

I wonder if I have an avenue to challenge this firm. I have her power of attorney. If so, can I do this now?

The Grandson

Dear Grandson,

As a trustee/executor of your grandmother’s estate, this happened on your watch, and you should act immediately so you can avoid exceeding any statute of limitations. It seems unfathomable that he would make such an investment. It’s time for a forensic investigation. What was the agreement between the adviser and your grandmother? Is there a paper trail? Did he ask her to sign documents? Did he put pressure on her or act without her knowledge?

Any investment has an element of risk, and the S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq COMP suffered significant losses last year. The burden of proof would lie with you if you were to sue your grandmother’s financial adviser on her behalf. But from what you’ve said, it is hard to justify buying individual stocks for someone her age — if he bought them. Did he actually buy them? Or did he record this as an investment loss? There are many questions that need answering.

“Sadly, this is not the first time I heard a story similar to yours,” says Larry Pon, a CPA based in Redwood City, Calif. “Instead of suing the broker, you should file a complaint with the broker’s manager. Every brokerage office has a compliance officer to make sure their brokers are compliant. They will have procedures for remedies. They may settle with you to avoid reporting to regulators or negative publicity. The brokerage also carries insurance to cover these losses.”

Not all money managers are fiduciaries — that is, professionals who have to act in their client’s best interest under the Investment Advisers Act of 1940. Find out whether your grandmother’s adviser is a fiduciary — rather than, say, a broker-dealer — and whether he’s a member of the Financial Industry Regulatory Authority. Certified financial planners have similar codes of ethics. It’s time to raise the alarm.

There is a good reason why advisers and planners belong to professional bodies. Finra operates the Office of Dispute Resolution, which acts as an arbitrator/mediator for members and investors in such matters, according to the law firm Haselkorn and Thibaut. “These claims do not involve depositions and are typically faster, more efficient, and less expensive than many alternative forums available,” it says.

“Check to see if she gave the broker authorization to do anything they want,” Pon adds. “You will need to modify these permissions. If you do not get a satisfactory answer, consult a lawyer for legal remedies and move the account elsewhere with an investment manager who will invest your grandmother’s money prudently. You can also contact your District Attorney’s office for Elder Abuse. They handle these types of cases, and may criminally charge the broker.”

So what constitutes negligence? The Gibbs Law Group gives some examples of possible negligence. “A good financial or investment adviser should have an understanding of your circumstances as an investor and recommend only suitable financial products for your age, investment objectives, experience, and desired level of risk,” the law firm says.

Your grandmother’s adviser should, in theory, be able to stand behind his choice of investments. “But negligent advisers will sometimes steer you towards risky or unsuitable investments to obtain higher commissions,” the law firm notes. “If your financial adviser placed you in an unsuitable investment for any reason, you may be entitled to monetary recovery.”

It does not seem like your grandmother’s adviser took sufficient steps to diversify her portfolio to protect against excessive losses. He has been enjoying the “halo effect” for far too long. He presumably inherited the business from his father, shared his last name, and shared many things with his father, except, it seems, good judgment. Buying five individual stocks for a 102-year-old woman? My gut reaction was: What was he thinking? Something doesn’t smell right here.

There will likely be counterarguments and red tape. Expect your grandmother’s adviser to mount a defense, however flimsy or aggressive that defense may be. He could, for instance, argue that he purchased these stocks for the estate. And financial institutions have been known to find a reason not to recognize a power of attorney in certain situations — for example, if the account was held in a trust or if it’s not a durable POA.

Finally, most investment contracts include an arbitration clause. Finra and the Securities Industry and Financial Markets Association (Sifma), a trade group representing securities firms, banks and asset managers, argue that arbitration saves all parties valuable time and money. and helps facilitate smaller claims from retail investors. Good luck in your investigation, and I urge you to take action so this does not happen to anyone else.

Readers write to me with all sorts of dilemmas.

By emailing your questions, you agree to have them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

The Moneyist regrets he cannot reply to questions individually.

More from Quentin Fottrell:

‘We live a rather lavish lifestyle’: My wife and I are 33, live in New York City and earn $270,000. Can we retire at 55?

I gave my daughter $5,000 for her divorce, but she lashed out when I refused to give her more. When will enough be enough?

‘He wanted nothing to do with me’: I discovered my biological father through Ancestry.com. Am I entitled to a share of his estate?

-Quentin Fottrell

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09-09-23 1122ET

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