We would normally have continued our sequence from the previous article – indeed the next article in this series will cover actual cases from our claims files where the duty of care has been an issue. We have, however, taken the unusual step of interrupting the sequence because as with the purported Ancient Curse, we are certainly living in interesting times, all the more so because they are unpredictable and volatile. Therefore, the subject of this brief article will be how to minimize the potential for execution or trading losses.
We find that with increased volatility in the trading levels of the investment markets comes an increase in the frequency and severity of trading losses. The number increases because the amount of time during the average trading day when the market is declining is generally higher than when the markets are less volatile; and the amount of loss increases because the intraday swings are greater than in less volatile markets. This in fact is what is meant when the investment markets are described as “more volatile” – higher whitecaps. So what?
We would suggest three steps, which can minimize the risk of loss when market pricing is highly volatile: Read More
In a series of several articles, we will explore the issue of negligence as interpreted against Registered Investment Advisors. Our intent is to lend the series a real world flavor by quoting liberally from our own claims files spanning some 20 years. We will start in this the first article by identifying how frequently negligence arises in claims made against Financial Advisory Professionals. I use this term rather than RIAs, because the only publicly available information on the claims made against Advisors and those offering similar services is through FINRA.
What insurance should the typical advisor have? This article will generally describe what constitutes an insurance program appropriate to a hypothetical small practice.