A recent $1.1 million arbitration award is the latest in a string of victories for Coastal Alabama residents who say they were misled by a well known former financial advisor from Mobile.
The award was handed down by the Financial Industry Regulatory Authority (FINRA) on July 11 against former advisor Jerry McCutchen and Iowa-based Berthel Fisher & Company Financial Services Inc., which McCutchen worked for from 2007 until his termination in 2014.
It stems from a complaint similar to dozens of others that have been filed against McCutchen and Berthel Fisher by former local clients who claim to have suffered losses after McCutchen put much of their money into risky investments without fully informing them of those risks.
According to the pending lawsuit, which makes similar claims, a majority of McCutchen’s clients in Mobile were or were soon to be at the age of retirement — a demographic that would typically benefit from a more conservative investment strategy to protect the money they’ve accumulated.
In multiple lawsuits and complaints filed against McCutchen since 2012, many former clients said they were misled to believe their money was in safe, conservative investments, when in fact, their portfolios were being disproportionately loaded with unconventional investments that generate big fees for advisers but often lead to significant losses for clients.
In most of those complaints, McCutchen maintained that he believed “the investments were suitable and the risks were disclosed to the client.” Calls to a number formerly associated with his business did not receive a response, and McCutchen has not commented on previous reports.
However, Michael Bixby, the attorney who brought the most recent claim against McCutchen on behalf of three Baldwin County families, said this was a recurring practice for McCutchen and Berthel Fisher, adding that the only people who would make the types of investments McCutchen was pushing are “people who don’t understand what they’re investing in.”
“This wasn’t an ‘oops, we did something wrong, but we tried our hardest’ situation. This was a strategic business decision,” he said. “It’s one thing to say I found one retired couple interested in taking a gamble, but it defies logic and common sense to say you just happened to have a huge group of retirees who all decided they wanted to invest in highly speculative investments.”
Throughout his career, McCutchen built a strong name in Mobile through his company Retiring with Dignity and through regular appearances on local TV and radio stations as a “financial expert.” He also had commercials featuring local celebrities and at one point was endorsed by national radio personality and money-management expert Dave Ramsey.
According to a lawsuit filed last month, those kinds of things helped McCutchen “prey upon older clientele.”
One former client, who asked her name not be printed, told Lagniappe she and her husband invested around $100,000 with McCutchen, but didn’t even know there might be a problem until they saw a for-sale sign outside of his office in Mobile.
Though she wouldn’t give an exact figure, the former client said she faced significant losses.
“We weren’t trust fund people, we were people who worked for our money. I was a school teacher and my husband was an engineer, but we saved,” she said. “He saw me and other clients as cash cows. These were risky investments and they were investments that were illiquid, meaning you couldn’t get your money out of them. Now some of those are worthless.”
Bixby told Lagniappe that one of his clients, a widow from Bay Minette, lost almost 80 percent of her savings. She is one of the five who’ll split the $1.1 million handed down from FINRA earlier this month, which both McCutchen and Berthel Fisher were held liable for. Yet, that is only one of the legal issues McCutchen has and likely will continue to face from his former career.
According to records kept by FINRA, 43 claims have been filed against him including 41 since 2012. Together, they represent more than $3 million that’s been paid out by McCutchen and Berthel Fisher, though few have made it to full arbitration. Most were settled by Berthel Fisher.
There’s another $2 million of claimed damages associated with several pending complaints. After those complaints continued to mount, FINRA eventually barred McCutchen from working as a broker or adviser in any capacity in 2016.
While it’s unclear exactly how many local residents may have been impacted, Bixby estimated it could easily be in the triple digits. He said each of the 43 FINRA complaints could include multiple families, and that he’s personally represented 12 individuals and spoken to a dozen more.
Charles Thompson, an attorney from Birmingham, told Lagniappe he’s represented another 35 clients over the last eight years, including several who are currently suing McCutchen and Berthel Fisher. A number of lawyers have made concentrated efforts to drum up business from McCutchen’s clients in the Mobile Bay area.
Several have run advertisements in the local media, including some in Lagniappe.
The sheer volume of the FINRA complaints against McCutchen makes him an “outlier” both locally and across the industry. That’s according to Dr. Brian Henderson, a professor of finance at George Washington University and a financial expert who has testified in a number of trials and arbitrations including one involving McCutchen.
Though he didn’t excuse McCutchen’s practices, Henderson also said Berthel Fisher bears responsibility because it ultimately failed to monitor what investments McCutchen was directing his clients’ money into. He urged consumers to take their time when selecting a financial adviser and to understand what they’re investing in as much as possible.
“Contrary to what a lot of people think, the industry does always require a fiduciary duty of a broker or advisor. A lot of folks are good at sales and managing client relationships, but those are different skills than understanding investments and knowing how to build a portfolio,” he said. “Your typical financial representative is not some sophisticated hedge-fund strategist. They rely on what their firm tells them to sell, and typically, you expect some amount of prudence goes into that.”
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