Man with Dementia Loses Millions through Risky Investments
According to an article in Yahoo Finance last week, the family of a once-wealthy individual is suing JPMorgan Chase & Co., alleging the bank allowed his $50 million fortune to dwindle to $1.5 million through risky investments.
Peter Doelger and his wife claim that, under JPMorgan’s oversight from age 78 to his mid-80s, his wealth drastically decreased. JPMorgan contends they were honoring Doelger’s desire for investment risks, which had previously been profitable. However, the family asserts that Doelger didn’t comprehend these risks, especially considering his cognitive decline and signs of dementia during that time.
The family accuses JPMorgan of maintaining Doelger’s risky, complex investments and lending him money, resulting in high fees and interest. JPMorgan, defending its actions, insists it had no knowledge of Doelger’s cognitive decline and points to a letter he signed in 2015, affirming his understanding and interest in such risky investments.
The dispute, ongoing in a Boston federal court, revolves around the family seeking to recover tens of millions of dollars, while JPMorgan vows to vigorously challenge the claims.
Doelger’s fortune reportedly diminished due to investments in Master Limited Partnerships (MLPs), traded investments primarily holding assets like oil and gas properties or pipelines. The inherent risk of MLPs lies in their concentration in a single industry, particularly sensitive to fluctuations in oil and gas prices. JPMorgan contends they cautioned Doelger about this risk and advised diversification, but he wasn’t swayed.
Master Limited Partnerships (MLPs) -JPMorgan Chase Lawsuit
Between 2009 and 2014, Doelger’s investments in MLPs outperformed the S&P 500, amassing him tens of millions. He aimed to continue this strategy, but in 2015 and 2016, a drastic fall in oil prices caused his portfolio to drop by 19% to about $30 million. Subsequent energy market fluctuations further reduced its value to $20 million by 2019.
The COVID-19 pandemic worsened things as Doelger’s wife, now a co-owner of his account, witnessed their MLP investments plummet by 24% in a day on March 9, 2020. Within days, they sold all assets to repay bank loans of nearly $10 million.
The Doelgers’ situation highlights the impact of declining cognitive abilities on financial decision-making among older individuals. Many older Americans hold substantial wealth, meeting criteria as “accredited” investors but might lack the necessary sophistication for unregulated securities markets, as per a 2019 study.
Mrs. Doelger reportedly admitted she didn’t grasp MLPs or the bank’s advice, feeling misled, echoing sentiments expressed by Doelger’s lawyer, who stated Doelger trusted others’ expertise without fully understanding, according to the article.
Shifting to Conservative Investments
For aging investors, advisors often recommend a shift to more conservative investments as retirement approaches, focusing on safer options like bonds, savings accounts, and stable dividend-paying stocks to ensure a reliable income stream.
For experienced investors eyeing MLPs, understanding their complexities is important. Seeking guidance from investment professionals to comprehend an MLP’s prospectus, financial statements, and associated risks is advised by the SEC to avoid substantial financial exposure. Rushing into such investments without full understanding is dangerous.
Broker Due Diligence
Broker dealers are required to inform clients of the risks associated with investment recommendations and to ensure that those recommendations are suitable for the investor in light of the investor’s age, risk tolerance, net worth, and investment experience. Firms that fail to do so, may be held responsible for any losses.
If you have suffered losses investing in Master Limited Partnerships or another high-risk investment, please contact The White Law Group at 888-637-5510 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington. For more information on the firm, visit WhiteSecuritiesLaw.com.