"Most advisors are going to say, 'We customize the portfolio to you, so we don't have a composite of returns to show you,'" said Kristi Kuechler, former president of the Institute for Private Investors, a membership group of high-net-worth investors. Some use that line to evade a request for performance history, she said.

When investors do run into problems with an RIA, they often decide to accept losses rather than face expensive, protracted legal action, said Laura Corsell, a partner with Montgomery, McCracken, Walker & Rhoads in Philadelphia.

Many advisors include arbitration clauses in their agreements with clients that require customers to bring any complaints through either the American Arbitration Association or JAMS private arbitration, according to C. Thomas Mason, a securities and employee benefits lawyer in Tucson, Arizona. The costs are "an enormous deterrent," Mason said. Standard initial filing fees for AAA range from $775 to $8,200 on claims of up to $5 million, and subsequent fees can top $70,000, depending upon complexity, length and the arbitrator's hourly rate, Mason said.

Ease Of Complaints

"More than 90 percent of the complaints we see are against brokers and broker-dealers," rather than against advisors, said Brian Hamburger, an Englewood, New Jersey-based attorney and the founder of MarketCounsel, which advises RIAs and brokers on compliance. That's in part because Finra makes it easier to bring complaints against a broker, "not because the brokerage model or the RIA model attracts a different caliber or class of people," he said.

The Levys went to court against Liskov in August 2010. They claim in legal filings they lost about $149,000 on positions taken by their advisor, including the exchange-traded fund. Liskov had invested them conservatively through the worst of the stock market's fall during 2008 and 2009, the Levys said in a telephone interview. Arnold, who works for a car dealership, has delayed retirement in part because of the investment losses, he said. Cheryl lost her job as an administrative assistant in 2010 and is currently unemployed.

Nothing Left
Liskov filed for bankruptcy in February of this year, which halted the progress of the lawsuit. Arnold Levy said he and his wife decided not to pursue the case in part because the U.S. Internal Revenue Service filed a tax lien on Liskov's home, which happened in 2010, according to the Plymouth County Registry of Deeds. Magary, their attorney, told the Levys the lien potentially would leave nothing for them.

Liskov had alerted the Levys to the initial purchase of the fund in a voicemail in July 2009, he said in court filings, and they were aware of the fund's risks, said Albert Zabin, an attorney for Liskov, who lives in Plymouth, Massachusetts. He's no longer registered as an investment advisor representative, according to the SEC website.

Capital Standard

Ordinary brokers must meet certain capital requirements that vary based on the size of their business and on the amount and type of trading they conduct, according to the SEC.

"If a large brokerage firm defrauds you, at least they have the money to pay you back," said Brian Smiley, an Atlanta- based securities lawyer.