Failure to Diversify

A broker generally has the duty to recommend that the customer’s account be diversified among different investments, investment classes, and industries. Proper diversification is key to controlling risk and avoiding excessive losses. If a broker concentrates too much of your portfolio in one type of investment, (such as stocks), or puts too much of your money in only one or two different stocks, or buys too many stocks in the same industry, you face a much greater risk of suffering a large loss.

For instance, millions of investors lost money in the last several years because their brokers had concentrated their accounts in oil and gas Master Limited Energy Partnerships that plummeted in 2014-2016.

A broker who fails to recommend a properly diversified portfolio can be liable for some or all of your losses.