When you hand your retirement savings, investment portfolio, or financial future to an advisor, you trust that person to act in your interest. A breach of fiduciary duty happens when that advisor puts their own profit ahead of your financial well-being. It is one of the most common forms of broker fraud and negligence, and it can cost investors thousands or even millions of dollars.

If you believe your financial advisor acted against your interests, contact The Frankowski Firm at 888-741-7503 for a free, confidential case evaluation. We work on a contingency fee basis, so you pay nothing unless we recover your losses.

Below, we break down exactly what fiduciary duty means, how advisors violate it, and what steps you can take to recover your investment losses through FINRA arbitration.

What Is Fiduciary Duty for Financial Advisors?

Fiduciary duty is the highest standard of care recognized under the law. A financial advisor who owes you a fiduciary duty must act with loyalty and care, always prioritizing your financial goals over their own compensation. This standard comes from the Investment Advisers Act of 1940, which requires registered investment advisers (RIAs) to serve as fiduciaries to their clients.

A fiduciary obligation includes two core duties:

• Duty of loyalty: Your advisor must put your interests first. They cannot recommend products or strategies that benefit them at your expense, and they must disclose any conflicts of interest that could influence their recommendations.
• Duty of care: Your advisor must provide advice that is suitable for your specific situation, including your age, risk tolerance, income, investment goals, and overall financial picture.

Not every financial professional owes you a fiduciary duty. Registered investment advisers are held to this standard by federal law. Broker-dealers, on the other hand, have historically operated under a lower standard. Knowing which standard applies to your advisor is the first step in evaluating whether your rights were violated.

Fiduciary Duty vs. the Suitability Standard

The distinction between fiduciary duty and the suitability standard matters because it determines what your advisor legally owed you.

Under the older suitability standard, a broker-dealer only needed to recommend investments that were “suitable” for your general financial profile at the time of the recommendation. A suitable investment could still carry high fees or conflicts of interest, as long as it was not outright inappropriate.

In 2019, the SEC adopted Regulation Best Interest (Reg BI), which raised the bar for broker-dealers. Under Reg BI, brokers must now act in the customer’s “best interest” when making recommendations, disclose material conflicts, and avoid placing their own financial incentives ahead of the customer’s interests. While Reg BI is stronger than the old suitability standard, many investor advocates argue it still falls short of a true fiduciary obligation.

Here is how these standards compare:

Regardless of which standard applies, if your advisor recommended investments that served their commissions rather than your financial goals, you may have a valid claim. A securities arbitration attorney can evaluate which standard applies and whether your advisor violated it.

Common Examples of Breach of Fiduciary Duty

Fiduciary breaches take many forms. Some are obvious, while others only become clear after reviewing account statements and trade records. The following are among the most frequent violations that securities fraud attorneys encounter:

Unsuitable investment recommendations. Your advisor recommends high-risk investments when your profile calls for conservative, income-generating assets. For example, a retiree relying on a fixed income receives recommendations to invest heavily in speculative stocks or complex structured products. This type of misconduct often forms the basis of a suitability claim.

Excessive trading (churning). Your advisor buys and sells securities at a high frequency, not to benefit your portfolio, but to generate commissions on each transaction. Churning erodes your account value through unnecessary transaction costs while padding the advisor’s income.

Failure to diversify. Rather than spreading your investments across different asset classes and sectors, your advisor concentrates your portfolio in a single stock, industry, or product type. This overconcentration and lack of diversification exposes you to avoidable risk.

Unauthorized transactions. Your advisor executes trades in your account without your knowledge or consent. Even in discretionary accounts, the advisor must still act within the scope of the authority you granted.

Failure to disclose conflicts of interest. Your advisor recommends a product that pays them a higher commission or bonus without telling you about that financial incentive. Fiduciaries are required to disclose these conflicts so you can make informed decisions.

Selling away. Your advisor sells investment products that are not approved or offered by their brokerage firm, often including high-risk private placements or unregistered securities. Selling away violates both fiduciary obligations and FINRA rules.

Misrepresentations and omissions. Your advisor exaggerates potential returns, downplays risks, or withholds material information about an investment. If you would have made a different decision with accurate information, this constitutes a breach.

If any of these situations sound familiar, do not wait to act. Call The Frankowski Firm at 888-741-7503 to discuss your case. Time limits apply to filing claims, and the sooner you act, the stronger your position.

How To Prove a Breach of Fiduciary Duty Claim

To succeed in a breach of fiduciary duty claim, you generally need to establish four legal elements:

1. A fiduciary duty existed. You must show that your advisor owed you a fiduciary duty or, at minimum, a duty to act in your interest. This is typically established through the advisory agreement, the type of account, and the nature of your relationship.
2. The advisor breached that duty. You must demonstrate specific conduct that fell below the required standard of care, such as recommending unsuitable investments, trading excessively, or failing to disclose conflicts.
3. The breach caused your losses. There must be a direct connection between your advisor’s misconduct and your financial harm. For instance, if your advisor concentrated your portfolio in a single stock that lost 60% of its value, the connection between the breach and your loss is clear.
4. You suffered actual damages. You need to quantify your financial losses. This often involves comparing your actual portfolio performance to what a properly managed portfolio would have returned over the same period.

Building a strong case requires documentation. Preserve your account statements, trade confirmations, correspondence with your advisor (emails, letters, notes from phone calls), and any marketing materials or prospectuses you received. Financial professionals who specialize in damages in securities cases can calculate your losses and provide testimony supporting your claim.

What Damages Can You Recover?

Investors who prove a breach of fiduciary duty may be entitled to several types of compensation:

• Compensatory damages: These cover your actual financial losses. One common method compares your portfolio’s actual performance to a benchmark, sometimes called the “well-managed portfolio” approach, to determine how much you lost because of the advisor’s misconduct.
• Disgorgement of fees and commissions: If your advisor earned fees or commissions through misconduct, an arbitration panel may order those amounts returned to you.
• Interest: Pre-judgment and post-judgment interest may be awarded to account for the time value of your lost funds.
• Attorneys’ fees and costs: In some cases, arbitration panels award reasonable attorneys’ fees and hearing costs, particularly when the advisor’s conduct was egregious.
• Punitive damages: While less common in FINRA arbitration, punitive damages may be available in cases involving willful misconduct or fraud.

The Frankowski Firm has recovered millions of dollars for defrauded investors, including awards exceeding $1,000,000 for individual clients. Every case is different, but a thorough evaluation of your account records can help determine what recovery may be possible.

Filing a FINRA Arbitration Claim

Most brokerage agreements include mandatory arbitration clauses, which means disputes between investors and their advisors are resolved through FINRA arbitration rather than in court. FINRA (the Financial Industry Regulatory Authority) operates the largest securities dispute resolution forum in the United States.

Here is what the process typically looks like:

1. File a Statement of Claim. Your attorney prepares and files a detailed written statement outlining the facts of your case, the violations committed, and the damages you are seeking.
2. Arbitrator selection. Both sides participate in selecting a panel of one or three arbitrators, depending on the size of the claim. Claims over $100,000 typically involve a three-person panel.
3. Discovery. Both parties exchange relevant documents, including account records, communications, and internal brokerage firm files.
4. Hearing. The arbitration hearing functions similarly to a trial. Both sides present evidence, call witnesses, and make arguments. However, the process is generally faster and less formal than litigation in court.
5. Award. The arbitration panel issues a binding decision. If the panel rules in your favor, the brokerage firm is required to pay the award.

One critical deadline to keep in mind: FINRA’s eligibility rule requires that claims be filed within six years of the event giving rise to the dispute. Waiting too long could mean losing your right to pursue recovery, regardless of how strong your case may be.

The Frankowski Firm is one of the few firms in the country that focuses specifically on FINRA arbitration. Lead attorney Richard Frankowski has over 25 years of experience representing investors in these proceedings and has authored books on securities arbitration used in law schools across the nation.

Do not let the statute of limitations expire on your claim. Contact our securities attorneys today at 888-741-7503 for a free case evaluation.

What To Do If You Suspect a Breach of Fiduciary Duty

If something feels wrong with your investment account, trust your instincts and take these steps:

1. Review your account statements carefully. Look for trades you did not authorize, unexpected losses, frequent buying and selling, or heavy concentration in a single investment.
2. Check your advisor’s background. Use FINRA’s BrokerCheck tool to investigate your broker and review their disciplinary history, customer complaints, and regulatory actions.
3. Preserve all records. Save account statements, trade confirmations, emails, letters, and notes from conversations with your advisor. Do not rely on your brokerage firm to maintain these records for you.
4. Do not confront your advisor alone. Speak with a securities fraud attorney before contacting your advisor or brokerage firm about the issue. Anything you say could be used against you in later proceedings.
5. Consult an attorney who handles FINRA arbitration. Securities fraud cases require specialized knowledge of FINRA rules, SEC regulations, and the arbitration process. A general practice attorney may not have this background.

Elderly investors and retirees are disproportionately targeted by advisors who breach their fiduciary duties. If you or a family member is a senior who has suffered investment losses, the misconduct may also constitute elder financial abuse by a financial advisor, which can carry additional legal protections.

Frequently Asked Questions

How serious is a breach of fiduciary duty?

A breach of fiduciary duty is a serious legal violation that can result in significant financial consequences for the advisor and their firm. Investors can recover compensatory damages, disgorgement of fees, interest, and in some cases punitive damages. Advisors may also face FINRA disciplinary actions, including fines, suspensions, or permanent bars from the securities industry.

What are three common examples of breaches of fiduciary duty?

Three of the most common examples include recommending unsuitable investments that do not match the client’s risk tolerance or goals, excessive trading (churning) to generate commissions, and failing to disclose conflicts of interest such as higher compensation for selling certain products. Each of these puts the advisor’s financial gain ahead of the client’s interests.

Can I sue my financial advisor for losing money?

Investment losses alone are not enough to file a claim. However, if your losses resulted from your advisor’s misconduct, such as recommending unsuitable investments, failing to diversify, or trading without your authorization, you may be able to recover those losses through FINRA arbitration. The key question is whether the advisor breached their duty to you, not simply whether the market declined.

How long do I have to file a claim against my financial advisor?

Under FINRA rules, you must file an arbitration claim within six years of the event that caused your losses. Some state laws may impose shorter deadlines. Because waiting can weaken your case and eventually eliminate your right to file, it is important to consult a securities attorney as soon as you suspect misconduct.

Do I have to pay upfront to hire a securities fraud attorney?

Not at The Frankowski Firm. We handle all investment fraud and breach of fiduciary duty cases on a contingency fee basis. You pay nothing unless we successfully recover your losses. We also cover all case costs and expenses during the process.

Protect Your Financial Future

A breach of fiduciary duty by a financial advisor can devastate your savings, your retirement plans, and your financial security. But you have rights, and the law provides a path to recovery.

The Frankowski Firm has spent over 25 years fighting for investors who were harmed by advisor misconduct. We have represented more than 2,000 investors in FINRA arbitrations across the country and have recovered millions in losses.

Call 888-741-7503 today for a free, confidential consultation, or reach out through our contact page. There is no cost and no obligation. We only get paid when you do.