Big Bank Questioned Over Steering Clients’ Investments

According to a recent Wall Street Journal article, J.P. Morgan Chase & Co. is under investigation by the Commodities Future Trading Commission over their practice of steering their clients into investing in a hedge fund that the bank owns.  From 2007 to 2012, the percentage of dollars invested by the bank’s clients in the bank-owned hedge fund went from 26% to 71%, which raised a red flag for regulators.  The possibility of lack of proper disclosures and complaints from customers that they were pressured into putting money into the fund that has not had good returns has also sparked the interest of regulators.

Banks and other financial firms are allowed to sell their products to their existing customers.  Indeed many people prefer to have all their investments handled in one place.  This is a perfect legal and legitimate practice.  However, advisors are not allowed to put the interests of the bank and their own interests over the interests of their customers.  Financial firms are required to make certain disclosures about the products and are only supposed to recommend products in the clients’ best interest.

There is a large and evolving area of the law dedicated to making sure people’s hard-earned money is being put to their best use instead of the best use of the advisor or financial institution.  While most financial advisors are honest people making an honest living, there are some who skirt the ethical rules about what is in the best interest of their clients.  Our firm has handled numerous cases over the years involving life insurance churning.  “Churning” is when an investment advisor takes a person out of one policy that has built up cash value and puts them in another policy.  The reason they sometimes do this is because the broker makes more commission selling a new product to a customer.  The problem is that it ends up costing the customer substantial amounts of hard-earned money.

Other examples of questionable financial dealings involve putting clients in investments that may not be suitable for their stage in life or in investments that involve higher fees for the same service they could get for a lower fee.  While the law makes proving these cases difficult, it is worth talking to an attorney or at least questioning your financial advisor if you suspect you are not being treated fairly.  We have seen too many cases of children who come to find out their elderly parents’ money is invested in something that is too risky for their stage in life, or they are being churned out of a perfectly good insurance policy for a new one, or they are being charged excessive fees on their investments.

Most people in the financial industry do a good job of looking out for their clients’ money. However, this industry is not immune from having its own few bad apples that take advantage of people.  You are entitled to information on your investments, including knowing how much in fees you are paying.  If you think you are not being treated fairly or have a family member you suspect is being taken advantage of, speak up, or speak to an experience attorney who can help evaluate the situation for you.  The lawyers at Jinks, Crow & Dickson, PC, have years of experience investigating claims of inside dealing by financial institutions that take advantage of their customers.  Stay vigilent and stay informed to make sure your money is working for you and not your investment firm.

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