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Florida Business, Whistleblower, & Securities Lawyers / Blog / Securities Arbitration / Has the Coronavirus Pandemic Led to Substantial Losses in Your Investment Accounts? What You Need to Know to Protect Yourself Against Further Losses

Has the Coronavirus Pandemic Led to Substantial Losses in Your Investment Accounts? What You Need to Know to Protect Yourself Against Further Losses


The coronavirus pandemic has jeopardized the health and lives of millions of people across the world and it is difficult to predict when we will resume our traditional way of life.  The pandemic also likely has affected the bottom line in your investment and retirement accounts — and not for the better.

What many people may not realize, however, is that if you are properly and suitably invested consistent with your investment objectives and risk tolerance, your accounts should be relatively protected against substantial market losses before they occur. And while there is no question that the COVID-19 outbreak has created erratic market volatility and led to an overall decline in the securities markets, in many ways the pandemic is not much different from other financial crises we have seen over the decades as to how it impacts investors. The common link is that investors who are properly and suitably invested consistent with their investment objectives and risk tolerance prove to be more insulated from major market events than those who are not.

Professionals who understand the inner workings of the securities industry know that a well-performing stock market – like the one we’ve had for a decade – often masks the negligence or misconduct of financial advisors that may be occurring in how they manage their customers’ accounts. This is because it usually takes a significant drop in a customer’s account balance to reveal that the advisor is not doing a material part of his or her job, i.e., protecting the customer’s principal while striving for growth.

This begs the question of what can an investor do to protect oneself against ongoing market volatility and to limit avoidable losses? The answer is to self-educate and develop a better  understanding of the role of a financial advisor, the benefits of diversifying an investment portfolio, and researching your financial advisor.

Understand the Duties and Obligations of a Financial Advisor  The doctrine of suitability is the single greatest duty governing the relationship between an advisor and his or her customer. Indeed, each advisor and brokerage firm are required to recommend only suitable investments consistent with the customer’s risk tolerance and investment objectives.  With that in mind, it is paramount that the investment objectives and risk tolerance reflected on the customer’s account documents are accurate.

Importantly, an advisor is also obligated to “know the customer” and to recommend only investments that make sense in the context of the investor’s complete financial picture.  The customer’s risk tolerance and investment objectives will serve as the roadmap for an advisor to recommend only investments that align with the roadmap.  Therefore, it is important that the customer discuss his or her investment objectives, risk tolerance, and other financial factors with the financial advisor at least annually. As the customer ages, experiences major life events, or his or her financial situation changes, the investment objectives or risk tolerance may change over the life of the accounts.

Understand the Benefits of Diversification The adage “don’t put all of your eggs in one basket” is particularly apt when discussing the risk of investing in the securities markets. Having a diversified portfolio is key to a safe investment strategy that may withstand the current market volatility we are going through during the pandemic. Diversification means having your portfolio invested in a variety of different ways that spread out risk factors. Examples of diversification include:

  • Asset Class Diversification. Investing in different asset classes (stocks, bonds, and cash);
  • Industry Diversification. Investing in different industries (financial, technology, healthcare, consumer staples, energy, real estate, etc.);
  • Company Diversification. Investing in many different companies;
  • Time Diversification. Investing regularly over time to avoid attempts at market timing;
  • Geographic Diversification. Investing in domestic and international companies with minimal region-heavy investments; and
  • Strategy Diversification. Investing in a variety of companies or funds with different market strategies (value, small-cap, mid-cap, large-cap, momentum, contrarian, etc.).

Ensuring that your advisor has implemented several of these diversification principles in your investment accounts will hedge against substantial losses due to any one factor.

Research Your Financial Advisor  Your advisor may seem trustworthy and competent, but how well do you really know your advisor? The irony is that the person you appoint to manage your retirement savings is not even required to have a college degree. An advisor only must pass a basic securities exam to obtain a Series 7 license, which permits the advisor to buy and sell stocks, bonds, municipal securities, and options and permits them to give you financial advice.

To really know your advisor, you should check your advisor’s regulatory and customer complaint history at www.brokercheck.org.  If your advisor has a history or pattern of customer complaints, particularly those have resulted in a large awards or settlements, that is material information you want to know.  When reviewing an advisor’s background on brokercheck.org, there are certain trends you want to review.  For more information on what to look for during your review, go to   https://www.finra.org/investors/insights/your-broker-has-customer-complaint-brokercheck-now-what.



The COVID-19 pandemic is a new frontier that we Americans have not faced in our lifetimes.  It has unquestionably changed our lives and shaken our economy, including the bottom line in most investors’ investment and retirement accounts.  To limit exposure to further market volatility and to limit avoidable losses, however, you need to take matters into your own hands by self-educating and developing a better understanding of your financial advisor’s competency and record, your advisor’s duties and obligations to you as an investor, and basic principles of diversification in reducing risk. If you take some proactive steps to become more educated and ask the right questions of your advisor, you likely will be able to avoid some of the losses that you otherwise might experience during these uncertain times.

Likewise, if you believe that your financial advisor has been negligent or engaged in misconduct in overseeing your investments, contact the securities attorneys at Rabin Kammerer Johnson for a free consultation at 1-877-915-4040.

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