She then asked Foss to manage her money. "I agreed, out of consideration for her brother," says Foss. "We invested her IRA in a portfolio that is about 80% bonds and 20 percent stocks, and we were able to stop the bleeding and even see a modest gain in value over the last several years."
To Foss, the moral of the story is twofold. First, know and abide by your client's wishes. "There is no place in our industry for advisers or brokers who engage in the leverage or trading of notoriously volatile securities in the accounts of clients for whom such are neither suitable nor in the client’s best interest," she says. "You don’t want to be the 'other broker' in such a scenario."
Second, if called upon to give a second opinion on another advisor's work, be honest with the client. "Don’t be afraid to call it as it is. It was obvious to me that a retired nurse had no business owning stock options in her IRA account, but without my urgent insistence it's possible she might have continued to allow the other advisor to keep exercising discretionary options trades," says Foss. "Don’t be afraid to take a stand when it’s in the clients' best interests. They are counting on you to know your stuff and stick to your guns."
Advisor Kimberly Foss is a speaker at FA’s upcoming Invest In Women conference.