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How You Can Be a Forensic Investigator

By Crucial Clips     October 25, 2017
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Aug. 21, 2017 

BRUCE LOVE, MANAGING EDITOR, FINANCIAL ADVISOR IQ: Hi. This is Bruce Love with Financial Advisor IQ. And I’m here with Lee Munson, who’s the CIO of Portfolio Wealth Advisors. So these cases you’ve worked on over the last, basically, decade with this attorney you work with, are you – is he mostly representing financial advisors or is it the investors?

LEE MUNSON, CIO, PORTFOLIO WEALTH ADVISORS: The stuff that I work on he’s representing the investors. He does a lot of business – he represents people who are breaking away who might have been wrongly fired from major firms. He does a lot of work.

But when I get brought in as his expert witness, it’s usually the end client that is seeking remedy for what they feel has been wrong to their financial portfolio.

BRUCE LOVE: So you, as a financial advisor, working as a forensic investigator, if you will, sounds very sexy.

LEE MUNSON: I love that term.

BRUCE LOVE: What exactly does the work involve for you?

LEE MUNSON: Well, the first thing – people don’t think about. Because you have your typical forensic witness, and they’re usually CPAs or people with an accounting degree. I have a Chartered Financial Analyst charter. I’m a CFP as well. So I have that background.

The first thing I’m doing is I’m working on case selection. I’m working with the attorney who’s brought me a case, or vice versa, and the first thing I do to add real value is I decide, is this a case that I think can be won? Has there – is there something there that’s not just an ethics violation? Do I see a real law get broken?

And then from there, I hand it back to Clinton, and he’s there to be the attorney, because I don’t practice law. From there, then what we’re doing is we’re figuring out, what would have happened if the portfolio was well managed, right? So we have to figure out – because that relates to what the damages are.

And then, at that same time – anybody could do those raw spreadsheets. It’s easy for me. A lot of people could do that. But I’m adding the value of case selection. And I’m also interfacing with the clients as well, interviewing them so that I can see what was happening from my perspective as an advisor versus the client only interfacing with the attorney that doesn’t have 20 years in the business.

Then I come back and I can explain in lay terms, in simple English, here is what I think the advisor did. Here’s where I think they went wrong. And here is where, or where not, we have a case.

And so that’s hugely important because, again, most security litigators, they haven’t been advising individual people for years and years and years, and they don’t know how to catch a thief. I worked on Wall Street in the ’90s as a stockbroker. I know all the tricks, right?

BRUCE LOVE: So you’re – so when you’re talking to clients, you’re trying to get a feel for how the advisor was advising them, what questions they were asking. Were they the right questions? Did they do the risk analysis appropriately?

LEE MUNSON: Correct.


LEE MUNSON: Was it suitable? Because the real issue is whether something is suitable or whether something is in the best interest of that client. That line is getting blurred right now.

And especially in arbitration there’s a little bit more leeway to say, even though you might hide behind the suitability concept saying, I didn’t do what’s in their best interest, I did what was suitable, when you get into Finra arbitration we definitely look at that.

But at the end of the day, if something is egregious, misguided, and if that advisor held themselves out to be a person that was trustworthy, if they held themselves to the public, they held themselves to the client as somebody that does work in your best interest, you break it, you buy it.

And that’s what we’re seeing, where people are under the direct impression that this person’s working in their best interest, because that has been what has been communicated, that’s what we see in the email exchanges. We see this level of care. So you can’t give a level of care for marketing purposes –

BRUCE LOVE: And then be – and then hold yourself to suitability rather than fiduciary.

LEE MUNSON: That’s right.

BRUCE LOVE: Interesting.

LEE MUNSON: And that’s what you can unearth in arbitration versus a federal court, right?

BRUCE LOVE: So it doesn’t sound like there’s ever – or is there a smoking gun, or is it really a collection of things?

LEE MUNSON: Well, I always think there’s a smoking gun, because I’m in the numbers. I’ll see some tiny little thing and say, that’s it. Well, that and a dozen other things.

There can be – in annuity cases, a lot of times there is a single document. There’s usually a document that I will photocopy and put up on my whiteboard and say, it all comes down to that. This is the mistake. This is the smoking gun.

But in general, you have to have a half a dozen, a dozen. You have to have multiple, multiple, multiple places of failure so that you can show a pattern of disregard for fiduciary responsibility. You have to show a pattern for creating hazard. You have to show a pattern that leaves the panel with the shock and awe that there must be financial remedy for what has happened.

BRUCE LOVE: Lee, thanks so much.

LEE MUNSON: Thank you.