How Bad Financial Advice Can Literally Make You Sick

Holly Marchak and her husband lost $2.3 million when they were defrauded in the Ponzi scheme of the so-called “Brooklyn Madoff.” Nine years later, she’s still paying for it.

She spends thousands of dollars a year on prescription drugs alone. Marchak, who lives in Orlando, Fla., began weeping as she told me the story of Philip Barry, now in federal prison, who defrauded her and her husband Alex Marchak. The money had been proceeds from the sale of a building that housed a funeral home the couple owned.

Marchak, 62, says she takes medication for anxiety, high blood pressure, asthma and heart problems. “There are times we don’t want to wake up in the morning,” she said. “My doctor has a mile-long, thick file on me and says it’s all stress-related.”

Lawyers who represent investors say the stress of a serious financial loss can trigger a whole new wave of costs for clients. Medical research has linked stress to viral infections, asthma, atherosclerosis, ulcers and increased risk for diabetesmellitus, among other diseases. More focused studies highlight the hazards of financial stress. You can read the full story here.

Wall Street Waging War Against Making Brokers Accountable to Investors

Securities and Exchange Commission Chair Mary Jo White told members of the House Financial Services Committee yesterday that there would be “many challenges” in changing the rules so that stock brokers and investment advisers are similarly regulated.

That’s an understatement. Wall Street has been on a tear for years fighting efforts to demand more of stock brokers. From my column yesterday for TheStreet:

As things stand today, brokers need only sell “suitable” investments that match a client’s investment profile. But they needn’t act as fiduciaries who are duty-bound to put clients’ interests ahead of their own, as investment advisers are expected to do.

You might think it’s a no-brainer that people doing essentially the same job in the financial industry should be subject to the same rules, but you’d be thinking wrong.

There are two fights going on related to the duties of investment advisers and brokers. There’s the one Ms. White has a say in: Changing the rules so that brokers and advisers both are expected to put their clients’ interest ahead of their own — a so-called “fiduciary duty.” And there’s another related to retirement money. The Department of Labor would like to raise the standards for people giving advice in that arena, too. President Barack Obama publicly supported the idea on Feb. 23.

The unsightly battle that has Wall Street fighting to avoid a more ethical approach to its customers is the latest reminder of the gap between the way the industry portrays itself in its marketing, and the way it actually treats its customers. From my column:

“These guys advertise like doctors and lawyers and litigate like used car salesman,” said Joseph C. Peiffer, president of the Public Investors Arbitration Bar Association, or Piaba, a group of lawyers who represent investors in securities arbitration.

You can read the story here.