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Feb 23, 2018 by |

Santa Clara County and California Securities Attorney: Suitability Rules


What to Expect From Your Financial Advisor

Rules Governing Investment Recommendations

Every day financial advisors recommend all kinds of investments to senior consumers in Santa Clara County and throughout California. Recommendations come from stock brokers, insurance agents, bankers, financial planners, and investment advisors.  Different government, industry and company rules govern these recommendations.  Generally, one of two standards controls: some advisors are constrained only to recommend “suitable” investments (the so-called suitability standard) while others are held to a stricter “fiduciary” standard, under which they are required to put a client’s interests first.  If the consumer is a senior, even stricter rules apply regarding suitability, disclosures, and “free look” provisions when the recommendation is an annuity or life insurance.

We at Evans Law Firm, Inc. represent consumers in Santa Clara County and throughout California who have lost money when the agent or advisor fails to meet the required standard of conduct. If you or a loved one has been the victim of securities fraud or other breach of an advisor’s duty or have lost money due to an unsuitable investment, annuity or life insurance or have been the victim of financial elder abuse, call the Santa Clara County and California financial elder abuse and securities lawyers at Evans Law Firm, Inc. (415) 441-8669 and we may be able to help.

What is Suitability?

The Financial Industry Regulatory Authority (FINRA) governs financial institutions and advisors in this country and sets the rules for investment “suitability” for its member firms and advisors[1].  The FINRA “suitability” rule states that an advisor “must have a reasonable basis to believe” that a transaction or investment strategy involving securities that they recommend is suitable for the customer. To determine whether the investment is suitable, the advisor must obtain information about

  • the customer’s age;
  • the customer’s existing investments;
  • financial situation and needs, which might include questions about annual income and liquid net worth and debt;
  • tax status, such as marginal tax rate and filing status;
  • investment objectives, which might include generating income, funding retirement, buying a home, preserving wealth, or more aggressive market speculation;
  • investment experience;
  • investment time horizon, such as the expected time available to achieve a particular financial goal;
  • liquidity needs, which is the customer’s need to convert investments to cash without incurring significant loss in value; and
  • risk tolerance, which is a customer’s willingness to risk losing some or all of the original investment in exchange for greater potential returns.

Whenever a broker or advisor tries to sell you an annuity, for example, he or she must conduct a suitability analysis. This is an extremely important step in investment decision-making and we at Evans Law Firm have seen brokers and agents avoid it entirely or trivialize it.  That is wrong.  Investments like annuities and life insurance tie up your money for years and are not suitable for many consumers, particularly the elderly who may need their money at any time for an emergency.  Always evaluate for yourself (and with a third party and tax professional) your own cash needs and allow for enough liquidity in the event of emergencies and future needs.  Keep in mind that annuity and life insurance carriers will charge heavy surrender penalties when you try to withdraw your own money ahead of the schedule the carriers set. And you may face a hefty tax on the withdrawal.   Don’t let yourself be caught in that trap.

Registered Investment Advisors (RIAs) are held to the higher “fiduciary” standard. RIAs must always put their customer’s interests before all others when making recommendations and when managing the client’s accounts.  They should recommend only investments that will serve your interests best not merely be “suitable” for you.  Recently, the Department of Labor expanded this “fiduciary rule” to all retirement investment advisors and it’s an important move. Here at Evans Law Firm, Inc. we have seen many cases where advisors and agents failed their customers under both the suitability and fiduciary standards.  We know what the applicable standards of care are in the investment world, including for annuity and life insurance sales.  If your broker or agent has violated those standards in their treatment of you, we can help.  If you are a senior, you may have been the victim of financial elder abuse and we can help you too. We represent clients in Santa Clara County and throughout the State of California.

Contact Us

If you or a loved one been the victim of a breach of fiduciary duty by your investment advisor or agent or have suffered economic loss as a result of an unsuitable investment or been the victim of financial elder abuse in Santa Clara County or any California county, contact California securities and financial elder abuse attorney Ingrid Evans and the other Evans Law Firm financial elder abuse and securities attorneys at (415) 441-8669, or by email at <a href=””></a>. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a FINRA arbitration, jury trial or toward an equitable settlement.  We handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.

Some of the leading providers of annuities and life insurance in California are listed below. We are not in any way suggesting that any of these carriers has done anything wrong.  Rather, the list is provided solely for our readers’ reference.

Allianz Life Insurance Company of North America

American National Life Insurance Company

Ameriprise Financial/RiverSource Life Insurance Company

Athene Annuity and Life Company

AXA Equitable Life Insurance Company

Bankers Life Insurance and Casualty Company

EquiTrust Life Insurance Company

Fidelity & Guaranty Life Insurance Company

Forethought Life Insurance Company/Global Atlantic Financial Group

Genworth Life Insurance Company

Global Atlantic Financial Group/Forethought Life Insurance Company

Guardian Life Insurance Company

Guggenheim Partners/Security Benefit Life Insurance Company

ING USA Annuity and Life Insurance Company

Jackson National Life Insurance Company

John Hancock Life Insurance Company

Lincoln Benefit Life Company

Massachusetts Mutual Life Insurance Company

Metlife/Metropolitan Life Insurance Company

New York Life Insurance Company

Northwestern Mutual Life Insurance Company

Pacific Life Insurance Company

Prudential Life Insurance Company

RiverSource Life Insurance Company/Ameriprise Financial

Security Benefit Life Insurance Company/Guggenheim Partners

Transamerica Life Insurance Company

Unum Life Insurance Company of America

Voya/Reliastar Life Insurance Company

[1] Other agencies and state governments, including the State of California, have their own specific suitability rules and the California securities lawyers at Evans Law Firm also represent clients in cases where those rules have been violated.

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