What Recourse Do You Have If You Received Bad Investment Advice?

In an economy where the price of goods and services is constantly increasing, often your only viable option to help grow wealth for your future is to invest in the stock market. However, the art of choosing high-performing stocks can be complex, and many investors seek out portfolio advice and management from a licensed professional. What happens if your investor steers you wrong and your accounts lose money? Do you have any recourse?

When can you recover monetary damages for bad investment advice?

The recovery question hinges on the existence of two things -- negligence and bad faith.

If your investment advisor recommends a certain portfolio or course of action (such as purchasing or selling specific stocks), and this course of action causes you to lose money, you may not be able to recover damages if the advice or action was taken in good faith. If the investment advisor truly believed, based on all the information reasonably available, that these investments were winners -- and invested on your behalf based on the guidelines and limits to which you agreed -- it is unlikely that he or she will be liable for any damages you've experienced. Unfortunately, following a bad tip often happens to the savviest of investors, and the only outcome of this is often a bit more caution when making future investment choices.

However, if your investment advisor engaged in bad faith, illegal activity, or negligence (for example, not executing trades at your direction or failing to make deposits in a timely manner), you may be able to file a lawsuit to attempt to recover some of your losses. Cases of insider trading or fund churning (such as the Bernie Madoff case) may often result in a financial settlement for affected investors.

What should you do if your investment loses money?

All investments fluctuate occasionally, depending upon the specific company's performance as well as the larger economy. A drop in value is to be expected, particularly among smaller or newer companies. Often, the best thing to do is just to wait the drop out.

However, if a company in which you've invested files for bankruptcy, or you discover that your portfolio is being charged more in fees than it's earning in dividends and asset appreciation, you may have a cognizable legal claim for your losses. Speak to an attorney, such as Philip L. Burnett, Attorney At Law, who is experienced in investment and financial law to help you start the process to recover your investment funds.