Since 2014, the value of many oil-, gas- and energy-related securities significantly declined. Think back to the course of dealing you had with your financial advisor and the firm he or she works(ed) for, and recall how many times he or she may have told you to “stay the course,” “hold on,” “oil prices will recover,” or something similar. While that may have been some good advice for some investors, it’s not always as easy or simple as it seems.
The “Know Your Customer” Requirement
Financial advisors and their firms are required under the securities laws and regulations to “know their customers.” This does not simply mean to send you a birthday card, remember your spouse’s name, your golf handicap, or where you like to vacation. The securities industry rules and regulations require much more from your financial advisor and his/her firm. Consideration of your age, investment experience, financial situation, investment objectives, tax status, time horizon, and your individual risk tolerance are all required. All of this is important and for many they change over time based on various factors and changes in life circumstances, requiring changes in investment strategies.