Lawsuits against Fisher Investments may lead to other adviser litigation

Meanwhile, firm's founder says cases "will run into a concrete wall'

May 17, 2009 @ 12:01 am

By Bruce Kelly

If legal action against Fisher Investments is any indication, financial advisers increasingly will face lawsuits and arbitration claims from clients who are angry about investment losses.

This month, two sets of former clients of Fisher Investments, whose founder and chief executive, Ken Fisher, is known for his redoubtable marketing skills, have sued the firm, both alleging that it failed to live up to its fiduciary duty during the recent calamitous market meltdown.

There will be “more claims versus advisers in this type of environment,” said Theodore Eppenstein, senior partner at Eppenstein & Eppenstein in New York, which represents investors. “I think advisers could expect” more lawsuits and arbitration claims, he said.

After past market free falls, such as the bear market following the bursting of the technology stock bubble, stockbrokers and broker-dealers have been by far the most common target of arbitration claims by stunned investors looking to recoup losses, industry observers said.

But the historic severity of the recent market fall, coupled with investors’ making little or no distinction between stockbrokers and investment advisers, make the latter increasingly vulnerable to such claims, some attorneys and industry observers said.

Mr. Fisher, for his part, brushes off both claims, one a lawsuit filed this month in federal court in Houston and the other an arbitration filed this month in Atlanta.


In an interview Thursday, he stressed the mere handful of legal claims by investors Fisher Investments has faced, and said that the lawyers who are representing the clients in both matters are “similarly incompetent.”

Both cases “will run into a concrete wall,” Mr. Fisher said.

“The person who will be sorry in the end is the client, who will wind up spending money on lawyers and getting nothing,” he said.

Mr. Fisher, discussing one of the plaintiff’s lawyers in the arbitration claim, Andrew Stoltmann of the Stoltmann Law Offices PC in Chicago, said he wanted to teach Mr. Stoltmann “a lesson he won’t forget.”

When told of Mr. Fisher’s comments, Mr. Stoltmann, co-counsel in the claim, said: “Bring it on, bring it on.”

Mr. Fisher, however, acknowledged that the financial services industry as a whole is likely to face an increasing number of legal claims.

During a presentation he made last month at an industry meeting in New York, he pointed out that in the aftermath of every bear market, there is a pickup in arbitration claims and litigation.

Both the lawsuit and the arbitration claim allege that Fisher Investments of Woodside, Calif., failed to protect the clients’ money before last year’s stock market collapse, because the firm invested their portfolios almost exclusively in stocks. on Tuesday reported one legal action against Mr. Fisher, a $1.2 million arbitration claim.

A lawsuit making a similar allegation was filed by an investor this month in federal court in Houston. In that suit, the investor, Maurine Ford, claims that Fisher Investments caused “significant losses” to a living trust that the firm started to manage in June 2008.

Prior to that, her trust was managed by Lighthouse Capital Management LP of Houston, from which Fisher Investments bought the client assets last year.

“Upon the transfer of the trust’s investment account from Lighthouse to Fisher Investments, the asset allocation in the trust’s account was as follows: cash 27%, fixed income 32% and equities 41%,” the lawsuit states. “Fisher Investments recommended that [Ms. Ford] reallocate the trust’s portfolio to invest 100% in equities,” the suit states.

The arbitration statement of claim, which was filed May 5 in Atlanta, alleges that Fisher Investments invested too much of a retired doctor and his wife’s $2.5 million portfolio in stocks, even with the market in free fall last year.


“As the market continued to plunge throughout 2008, there was one common theme from Fisher Investments: blind optimism and staying fully invested in equities,” the arbitration claim states.

“Despite overwhelming evidence of a bear market, Fisher Investments kept its elderly and retired clients almost 100% in equities,” according to the arbitration claim, which was filed with Jams, an Irvine, Calif.-based private provider of alternative dispute resolution services.

The claim was filed by Brent and Michelle Murphy of Savannah, Ga. Mr. Murphy is 61, and his wife is 60.

Mr. Stoltmann said he expects to file more claims against Fisher Investments in the coming weeks.

Mr. Fisher declined to comment about either the arbitration or the lawsuit, because that would violate the privacy of the clients, he said.

However, he emphasized that Fisher Investments, which is one of the most noted investment advisory firms in the country, has a rigorous process of vetting clients and gathering information to review their goals and needs when they invest with the firm.

“We are over-the-top careful in this process,” he said.

Fisher Investments has $28 billion in client assets and 37,648 accounts, making it one of the largest registered investment advisory firms in the United States.

E-mail Bruce Kelly at


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