When investors approach Dallas lawyer Richard Lewins about a dispute they have with their stockbroker, they know he has a unique perspective.
With 14 years under his belt in the brokerage industry — including stints as a broker, regional sales manager and compliance officer — Lewins feels pretty confident about how to represent aggrieved investors.
“I know how the sausage is made,” he said.
Lewins said he decided to become a lawyer and represent investors because he didn’t like how the brokerage industry treated clients.
He decided to package his knowledge and experience in a soon-to-be-published book titled “How to Keep From Going Broke With a Broker.”
He said investors typically find a broker several ways, including:
Referral: This is the most common method.
“When dealing with an unfamiliar situation or experience, most of us look for company as opposed to charting a new course ourselves,” Lewins said. “Obtaining a referral satisfies that need.”
But don’t just take the good word of the person who referred you to the broker, he said.
For one thing, your investment objectives and risk tolerance may be completely different from those of the person who gave the referral.
“The reality is, in most cases, you have no idea what, if any, due diligence this person did in selecting the broker now referred to you,” Lewins said. “The point is, you need to do a little digging and due diligence yourself.”
Cold calling: Known as “smiling and dialing” in the old days, Lewins said, this is when you get an unsolicited call from a broker seeking your business.
“Understand that the more time you spend on the phone with a broker, the more likely you are to succumb to his pitch,” Lewins said. “This is especially true of the elderly and/or lonely.”
Brokers are professional sales representatives who are trained on “how to make you feel comfortable and how to overcome your objections,” he said.
“If you do not want to choose your broker via an anonymous voice on the phone, then politely but firmly say, ‘No, thank you,’ and hang up,” Lewins said.
Attending a seminar: More and more brokers are using seminars to find new clients, he said.
“The invitation is almost always couched in terms of giving you information or education. But at the end of the day, the brokers who put on these seminars are there to sell you a product or an investment plan of some sort, something that will generate a commission or fee for them,” Lewins said.
Don’t select a broker purely on attendance at a seminar.
“As a method of deciding on whom to invest your money with, attending a seminar is only a step, and a small one at that, above responding to a cold call,” Lewins said.
Affinity groups: Marketing to affinity groups — people with a shared experience or background, such as members of the same church — is growing in the financial services industry, Lewins said.
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