Judge rules client – not advisor – responsible for loss

Judge rules client – not advisor – responsible for loss

Judge rules client – not advisor – responsible for loss A client who argued her financial advisor had a fiduciary duty to protect her $4-million inheritance had her case dismissed by a Supreme Court judge, who said her rash decision to sell her portfolio led to losses.

“I cannot agree with Ms. (Cathleen) Graham that Mr. Wells’ duties, whether as her advisor or as the fiduciary she submits he was − and I do not decide that point − extended as far as she contends,” the report reads.

“I find that Graham has convinced herself of a naiveté and a vulnerability concerning her investments that do not accord with her actual state of knowledge and her role in the client-advisor relationship during the period in issue.”

The judge’s comments come after his ruling that Robert Wells, an advisor with CIBC World Markets Inc., was not responsible for losses his former client suffered in 2009, following the financial crisis in 2008.

Paul Shelestowsky, a wealth advisor with the Meridian Credit Union, said that cases like this were not uncommon following the financial crisis.

“In 2008, a lot of advisors where saying “it’s not my fault, I don’t control the markets”, and we don’t, but if we have done our duty to ensure we are using the right products for the right person, then helping them through down periods should be a partnership, and not confrontational,” he told WP.

However, this was not the case in this instance.

Wells’ former client inherited $4-million by age 30 after her mother, father and brother died within a two-year period, leaving her as the only surviving member. As a result, the judge ruled that the client had an emotional attachment to the money as a result of the terrible losses.

Graham chose to invest the money with Wells and did so until the financial crisis hit in 2008. The financial downturn led to significant losses, but instead of waiting for the market to recover, she turned against Wells’ advice and decided to sell her portfolio. That, according to the judge, led to more losses.

She blamed Wells for having led her astray, investing in sub-standard products and claimed the advisor had a fiduciary responsibility to protect her investments. Wells’ and his firm disagreed.

“By unilaterally and unreasonably liquidating her portfolio at a low point after the market crash, instead of allowing the portfolio to rebound with the market as Mr. Wells advised."
 
4 Comments
  • Mike Duggan 2015-05-12 10:18:16 AM
    I am happy to read this judge's decision.
    Post a reply
  • Will Ashworth 2015-05-12 10:42:59 AM
    Mike, I think most advisors would second your sentiments.
    Post a reply
  • Gerry Brinkman 2015-05-12 11:56:22 AM
    A moment of clarity. I am encouraged by this ruling.
    Post a reply