Question: My sister and her husband use a well-known investment firm in the Bay Area. They meet annually for tax assistance and investment management. Last year they were assigned a new adviser who encouraged them to withdraw their money from a managed account to save on fees.

He invested a small amount at the time, with plans to meet again after he formulated a strategy for the rest. The meeting never occurred. At this year’s meeting, they realized that the money had not been reinvested. The adviser’s reaction was “Oops, I goofed,” followed by “But you goofed, too.”

The firm estimated that had the money not been withdrawn from the managed account, it would have netted $20,000. My sister believes the firm neglected its fiduciary responsibility by advising them to abandon their managed account without follow-up. The firm offered $4,000 to settle. Do they have any other recourse?

Answer: Your sister and her husband can file a lawsuit, but given the set of facts, she may want to continue negotiating a deal with the investment firm instead of pursuing legal action. Her claim is not the typical claim against a financial adviser for losses resulting from an adviser’s misrepresentation or choice of unsuitable investments. Her claim is for simple negligence, which may be easier to show, but the damages she seeks for the loss of an investment opportunity may be difficult to prove.

You are correct that the investment adviser, as a fiduciary, has a heightened duty of loyalty and care. The investment adviser, however, did not appear to profit from the wrong. In fact, his actions were motivated, in part, to save them the high cost of fees in the managed account. He does have a duty of care to your sister, which includes not making simple mistakes.

As politicians say, “mistakes were made.” The question here is who was responsible for ensuring that a follow-up meeting took place. Someone obviously “goofed,” leaving the question of who should bear the fault. You mention that the plans were to meet after the financial adviser formulated a strategy. That would imply that the onus was on him to schedule the appointment.

At the same time, however, your sister likely received monthly or quarterly statements, and she will have to explain why she did not notice the lack of investment in her account. Even more damaging to her case, if she did notice it, she may have to explain why, after seeing it, she failed to schedule a meeting herself.

Even assuming that the investment adviser was solely to blame in failing to schedule the appointment, your sister faces an additional challenge because she will have to show that his error caused her damages. She will have to show that had a meeting been scheduled, she would have placed the funds in an investment that performed as well as the one she was previously in.

Assume that there was a follow-up meeting and your sister agreed to place all or even some of the money in Snapchat or a poorly performing mutual fund, she would be pointing to a completely different mistake that was made.

Although a lost opportunity of $20,000 is quite significant by any measure, attorney’s fees and costs for such a claim can escalate quickly. Your sister and her husband might be better off continuing to negotiate with the investment firm.

If both parties “goofed,” maybe a decent resolution is both parties sharing the cost of the lost opportunity equally at $10,000 each. There’s no harm in asking. Just make sure that the meeting is scheduled!

Preston Morgan is a partner at Kopper, Morgan & Dietrich, a Davis law firm providing family law, estate planning and trust litigation representation. His column is published every other week in the Davis Enterprise. To pose a question to Preston Morgan, contact him at

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