Advisor’s texts could spell big trouble in court
According to Reporter Asia Martin, writing in Wealth Management, legal observers say that Advisor Brian Doench’s recorded text messages to his client may work against him in court. Ouch!
At issue is that financial advisor Brian Doench may have been a bit too casual in his friendly text messages with his client. David “Ryan” McCaigue has accused his advisor Doench, 44, of Doench Wealth Management in Charlottesville, VA, of recklessly managing his Individual Retirement Account (IRA), trading in and out of penny stocks and violating his fiduciary duty to his client.
Were Doench’s LOL texts funny?
Apparently not. According to McCaigue, Doench allegedly responded to a more than 50% decline in his IRA’s fund with a series of text messages that included language such as “lol” and “hahaha” when referring to the IRA. In fact, McCaigue has listed a handful of these text messages as evidence that the advisor knew he had mishandled the account in a suit filed by Attorney David Silver of Silver Miller in the U.S. District Court for the Southern District of Florida.
When McCaigue had entrusted Doench with managing his IRA in 2014, the account had $345,511.55 in principal. But by April 2020, account funds had dwindled by nearly 55% to $147,194.70, according to the complaint.
Sorry. Not sorry?
In April 2018, Doench texted McCaigue, saying, “I honestly don’t feel like I’ve helped you that much, which I’m rather embarrassed about lol!” The messages, says Attorney Kalyu Nekvasil of Goodman & Nekvasil in Clearwater, FL, show at the very least a reckless disregard for a client’s interest. “‘LOL,’” she says, “is mostly used to indicate smiling or slight amusement. There’s nothing amusing about losing this significant amount of money from a fiduciary.”
“If my IRA was down in an up market, between 55-60%, I would be upset whether it’s the advisor’s fault or not. And I would consider a message like ‘LOL’ to be insulting.”
Aggressive investments contrary to client instructions
McCaigue claims Doench aggressively invested his IRA in risky penny and marijuana stocks, like Aurora Cannabis, Ambler, eWell Healthcare Corporation, and KinerjaPay Corp. According to the court document, Doench would trade in and out of the stocks on a “near-daily basis.”
McCaigue and Doench had known each other for two years prior to 2014. They were initially neighbors in a condominium community in Miami-Dade. In the complaint, McCaigue stated that the two had formed an amicable relationship, asked neighborly favors of each other, and had exchanged phone numbers. McCaigue had even nicknamed the advisors as “Bman Doench” in his phone.
When McCaigue moved to Hollywood, FL, their relationship had shifted to a professional one. Around that time, McCaigue shared his financial situation with Doench, who offered his advisory services and provided McCaigue with a brochure of Doench Wealth Management. Doench had just launched his RIA that year, following a breakaway from Next Financial Group, a subsidiary of Atria Wealth Solutions.
McCaigue says he clearly explained that his IRA, totaling $223,246.68 in November 2014, was his retirement nest egg and that he wanted to preserve his principal while achieving modest growth. Doench texted McCaigue that he would honor his client’s risk tolerance: “Don’t worry, we won’t ever do 50/50! Gotta preserve your $$ as much as make more lol.”
Two years later, when McCaigue noticed he hadn’t been billed for Doench’s advisory services, he texted Doench. Doench responded, “Hahaha, thanks man. We’ll see. I promised myself and you not to charge until we broke even—and I’m super embarrassed your holdings haven’t performed better over the past couple of years. No worries my friend, happy to help in any way I can!”
Doench allegedly sent another text about his inability to increase McCaigue’s IRA assets in April 2018. “I honestly don’t feel like I’ve helped you that much, which I’m rather embarrassed about lol!”
Despite Doench’s admission, in May, McCaigue added $121,861.81 to the IRA from a separate retirement account. The client had expressed interest in PetIQ, a manufacturer of pet health products and services, some months before. At his client’s request, the advisor invested $125,000 into PetIQ between July and August of that year. That investment, according to the complaint, was one of the few to yield a positive return.
All told, McCaigue suffered a net loss of $192,536.11 along with fees of $1,204.50. Backing out the gain on PetIQ, according to the complaint, the trading losses in the IRA based on Doench’s portfolio was $264,057.94, “a staggering seventy-five percent (75%) of Plaintiff’s IRA.” Florida securities litigators say the text messages will give the claimant’s attorney a leg to stand on when fighting for punitive damages.
In an interview with Regulatory Attorney Bill Singer, Martin reported that the text messages are symptomatic of a more significant issue. “We have a lot of young [advisors] that haven’t quite grown up and they engage in foolish conduct that sometimes is sexist, sometimes its racist, sometimes it’s homophobic, and sometimes it manifests itself in what we have today. If you lost someone’s retirement, or much of it—[This] would be as if Bernie Madoff sent his clients an email that said ‘LOL’ or had an emoji in it.”
Where was compliance?
Not looped in, perhaps? And that’s where Patrina comes in, particularly when it comes to compliant texting. For more than 25 years, Patrina has been helping compliance professionals like you stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask me about Patrina’s cost-effective designated third-party services, our comprehensive 8-module compliance solution, and compliant data capture & file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.Let’s talk.