Cognitive biases are beliefs that people form over their lifetime. These biases often impact our decisions. One such cognitive bias is known as the “authority” bias, where people tend to accept whatever a perceived authority figure says without question. […]
There are three simple rules you should follow when you are solicited over the phone by a financial advisor. First, do not start a conversation. Second, you should immediately hang-up. And third, contact the Do Not Call Registry.
High quality financial advisors do not make unsolicited phone calls. Only aggressive salesmen, who are usually young and inexperienced, make cold calls. They are predators who are trained to prey on nice people. […]
In the hundreds of cases we have handled for abused investors the one constant in virtually every case is the defense that our client is a “sophisticated investor.” The specifics become comical, ludicrous and infuriating. In one case, our client was 100 years old when her portfolio was loaded up with highly risky “alternative investments” that became worthless. The defense was that she had 40 years of investment experience at the time she was sold the product and that her earlier holdings in diversified mutual funds qualified her as a “sophisticated investor.” […]
As its name implies, GWG Life Settlements of Minneapolis is in the business of purchasing life insurance policies on which it continues to pay the premiums in order to collect the face value of the policy when the insured dies.
GWG Holdings, the parent company of GWG Life Settlements, issues debentures (i.e. bonds) to investors. According to FINRA, part of GWG’s sales pitch to investors is that its bonds are collateralized by the life insurance policies that have been bought by GWG Life Settlements. These life insurance policies naturally are issued primarily by highly-rated, household name insurance companies. The names and high credit ratings of these well-known companies are highly visible in the GWG literature. […]
The historical background behind ‘soft dollar’ compensation on Wall Street is that Wall Street firms often provide a great deal of research and data to their clients and that some of the cost of this can and should be made-up in commissions charged to clients on trades. The euphemism ‘soft dollars’ connotes that these dollars are marginal and not ‘hard’ or painful to the client in the context of the larger relationship.
Over the years, however, the notion of soft dollar compensation practices has been applied beyond the mere providing of research. Today, the SEC defines ‘soft dollar’ practices extremely broadly as arrangements under which products or services other than execution of securities transactions are obtained by a financial advisor from or through a broker-dealer in exchange for the direction by the advisor of client brokerage transactions to the broker-dealer. […]