As a former financial advisor and legal expert with over a decade of experience, I’ve seen my fair share of cases where investors have been misled or taken advantage of by unscrupulous advisors. The recent complaint against Jared Skemp, a financial advisor with Key Investment Services in Warren, Pennsylvania, is a prime example of the serious consequences that can result from such misconduct.
According to FINRA records, the investor complaint filed in August 2024 alleges that Mr. Skemp misrepresented investments in two annuities: an Allianz Index Advantage Income variable annuity and a Protective Income Builder indexed annuity. While the damages sought remain unspecified, the mere fact that a complaint has been filed is cause for concern.
As an advisor with 23 years of securities industry experience, Mr. Skemp should be well-versed in the rules and regulations governing the sale of investment products. His background includes registrations with several firms, including LPL Financial, NatCity Investments, and Princor Financial Services Corporation, among others. He has also passed five securities industry qualifying exams, demonstrating his knowledge of the industry.
However, even experienced advisors can engage in misconduct, whether intentionally or through negligence. In this case, the allegation of misrepresentation is particularly serious, as it suggests that Mr. Skemp may have provided false or misleading information to his client about the nature and risks of the annuity investments.
Understanding Annuities and FINRA Rules
For those unfamiliar with annuities, they are essentially insurance products that provide a stream of payments to the investor over a set period of time. There are several types of annuities, each with its own features and risks:
- Variable annuities offer returns based on the performance of underlying investments, which can fluctuate with market conditions.
- Indexed annuities provide returns based on the performance of a specified market index, such as the S&P 500.
FINRA, the regulatory body overseeing the securities industry, has specific rules in place to protect investors from misconduct related to annuity sales. FINRA Rule 2330 requires advisors to ensure that any annuity recommendations they make are suitable for the investor based on their financial situation, investment objectives, and risk tolerance.
If Mr. Skemp misrepresented the features or risks of the annuities he recommended, he may have violated this rule and breached his duty to his client. The consequences of such misconduct can be severe, including fines, suspensions, or even a permanent bar from the securities industry.
Lessons for Investors
This case serves as a stark reminder of the importance of thoroughly researching any investment opportunity and the advisor recommending it. As the famous investor Warren Buffett once said, “Risk comes from not knowing what you’re doing.”
Before investing, take the time to understand the product being offered, including its potential benefits and drawbacks. Don’t hesitate to ask questions and seek out additional information from trusted sources. And remember, if something sounds too good to be true, it probably is.
It’s also crucial to work with an advisor you trust, someone who has a proven track record of putting their clients’ interests first. While the vast majority of financial advisors are honest and ethical, there will always be a few bad apples. In fact, according to a study by the University of Chicago, roughly 7% of financial advisors have a history of misconduct.
If you suspect that your advisor has engaged in misconduct, don’t hesitate to report it to the proper authorities. Organizations like FINRA and the Securities and Exchange Commission are there to protect investors and ensure that advisors are held accountable for their actions.
In the end, the key to successful investing is knowledge, diligence, and a healthy dose of skepticism. By staying informed and working with trusted professionals, you can navigate the complex world of finance with confidence.
