Over the past few years, there has been a surge of professionals promising to assist in maximizing individual financial profits, dubbed investment advisors. Unfortunately, some of our trust has been misplaced. One such case is a recent allegation against Lyons Wealth Management, LLC, where investors experienced significant loss due to a proprietary option trading strategy implemented by the firm.
Seriousness of the Allegation and Its Effect on Investors
Lyons Wealth Management, a Florida-based company managing around $160 million in assets, offered a proprietary options trading strategy dubbed the “Lyons Enhanced Yield Program”. With pledges of a smooth 12%-14% annual cash flow generated via dividends, this strategy invited investors seeking to maximize returns. However, lofty promises quickly swiveled into a significant nightmare as the strategy awry, leaving investors with losses instead of profits.
RIAs such as Lyons Wealth Management are bound by the Investment Advisors Act of 1940 that imposes a fiduciary duty, requiring complete transparency, conducting thorough investment research, and acting in the best interest of the client. Failure to do so may lead to their breach of fiduciary duty, inciting the current situation.
Broker Dealer Background and Previous Issues
Probing into Lyons Wealth Management‘s past, we find that it has managed substantial assets, encountering relatively few complaints. However, considering the loss steered by its recent proprietary strategy, concern over its operations’ credibility is apparent.
Despite having a relatively clean record, the lack of prior complaints does not guarantee a firm’s future operations. As Benjamin Franklin famously stated, “An investment in knowledge pays the best interest.” As such, seeking as much information about the history, brokerage record, and strategies of an investment advisor becomes quintessential before trusting them with hard-earned money.
Explanation of FINRA Rule
Before delving into the failures of Lyons Wealth Management, let’s take a moment to understand FINRA Rule 2111- Suitability, crucial in this regard. The rule FINRA Rule 2111, as imposed by the Financial Industry Regulatory Authority (FINRA), requires investment advisors to have a reasonable basis for recommending a series of action to a client, ensuring the suggested strategy suits the client’s investment profile. Clearly, this rule has not been intelligently followed in this scenario.
Understanding such rules allows investors to protect themselves, be aware of their rights, and identify when these rights have been violated before experiencing severe losses.
Consequences and Lessons Learned
The result of Lyons Wealth Management’s action culminated in significant financial loss experienced by investors, prompting them to question the integrity of investment advisors at large. Despite no public reprimand being issued to the firm as of now, there’s a high probability of compensatory claims surfacing soon.
Reflecting on this event, it becomes essential to learn a few lessons to prevent similar incidents in the future. The first step? Ensure the selected investment advisor has a transparent track record. More importantly, understand the investment strategies suggested by these advisors, making sure to invest in strategies suitable for individual financial situations.
Caution – did you know that, according to the Securities Litigation & Consulting Group (SLCG), investors lose approximately $17 billion to bad financial advisors annually? With the staggering number in mind, it’s time to take proactivity seriously when considering wealth management options.
Remember, investing shouldn’t just be about maximizing financial returns – it should also involve an investment in constant learning and proactive decision making to safeguard financial health and stability.
