A FINRA arbitration panel ordered Morgan Stanley and a former advisor to pay an elderly widow almost $210,000 for committing a cardinal sin in the world of financial advising: they failed to confer with her about the eccentric investment strategy her husband developed with the advisor prior to her husband's unexpected death.
The client's late husband and advisor Jeffrey Miller came up with an investment strategy that was heavily focused on raw materials, precious metals and commodities, securities that were not only volatile but had a time horizon of seven to 22 years, according to the client's attorney, Sabato Fiano of Connecticut law firm Zeldes, Needle & Cooper.
At 77, his client, Martha Simkovitz, was not interested in 22 years or even seven, Sabato said, adding that she was looking for a much more conservative investment approach.
Fiano criticized Miller for keeping her in the same strategy that he devised with her husband without ever revisiting with her whether it was her strategy as well.
"She never had an opportunity to be adequately advised as to the type of ebbs and flows in volatility that this investment strategy had," he said.
Indeed, Miller hardly spoke to Simkovitz after her husband's death, making check-in phone calls every two months that lasted a couple of minutes at a time. In contrast, he spoke with her husband on at least a weekly basis and met with him in his home twice a month when he was alive, according to Fiano.
Miller had the couple as clients for two and half years prior to the husband's sudden death in August 2011.
Simkovitz was an unsophisticated investor with limited investing knowledge, making the investment strategy Miller pursued after her husband's death unsuitable, especially given her age, Fiano argued during the arbitration hearing.
From 2011 to 2013, the volatility of the strategy caught up with the investments, "giving rise to losses that she was not willing to tolerate," Fiano said.
The arbitration award of $210, 000 was in line with the client's investment losses, according to Fiano.
Miller, now an advisor with UBS in Greenwich, Connecticut, did not return an email seeking comment. In a statement in his BrokerCheck report, Miller denied the allegations made by the client and maintained that all investments recommended were suitable.
Miller worked for Morgan Stanley from June 2007 to November 2013, BrokerCheck records show.
Margaret Draper, a spokeswoman for Morgan Stanley, had no comment.
In addition to ordering Miller and Morgan Stanley to pay the client $210,000, the arbitration panel denied their request to expunge the client's complaint from FINRA's Central Registration Depository.