Clients of a Colorado financial advisor are taking legal action against him over what they say were inappropriate investment strategies that resulted in significant financial losses, ThinkAdvisor reports.
The plaintiffs are two couples, David Elzea and Deborah Elzea-Jostes, and Mark Zyk and Rhona Flanagan. They have filed a civil lawsuit in Colorado District Court against registered investment advisor Adam Brunin and the Fort Collins-based firm that he is president of, Navigation Wealth Management.
The couples retained Brunin and his firm to manage their savings but allege that he put their funds into high-risk strategies that were inappropriate for them us unsophisticated investors. They also claim the defendants used an algorithm to time trades without authorization or qualified human oversight. The plaintiffs’ attorney told ThinkAdvisor that due to these actions, both couples’ portfolios lost about 25% during a time of record returns in the fixed income and equities markets.
The lawsuit accused Brunin and Navigation Wealth of breach of fiduciary duty, negligence, negligent misrepresentation and violating the Colorado Securities Act.
In the case of the Elzeas, the complaint states that they were not sophisticated investors and feared the kind of financial losses they had suffered when the markets dropped during the pandemic. After retaining Brunin, he was given discretion to invest their portfolio “in a manner consistent with [their] best interests.”
The couple said they had learned that fixed investments were a safe way to earn 5% annual returns to help fund their retirement but allege that “Brunin responded that they should not be in fixed investments, and he could obtain returns of ‘5% all day long’ and indicated that the investments they had seen were unwise.”
Brunin presented his algorithm indicating the funds would grow significantly without suffering losses, according to the lawsuit, which adds, “Defendants assured Plaintiffs that their existing savings were sufficient for Plaintiff Deborah Elzea-Jostes to also retire — despite her being well below retirement age and the couple holding a $550,000 mortgage, with a daughter who suffers from disabilities.” Deborah Elzea-Jostes retired from her career a week later.
But Brunin and Navigation, using their discretionary control, invested 100% of the Elzeas’ assets in equities, though the lawsuit says that allocation was inconsistent with the Elzeas’ risk tolerance, the industry standard for retirees and the fundamental principles of diversification. The advisor is also alleged to have used algorithms to execute the trades, with trades “often triggered … without oversight from licensed advisors.”.
“Defendants continued to engage in market timing and other risky strategies, which proved to be wrong, including panic selling after a Japanese yen report caused the S&P 500 market to dip 11% in a single day, only to rebound days later. An appropriate investment allocation and management would not have been susceptible to such volatility,” the lawsuit contends. From March to September 2024, the Elzeas claim they lost an estimated $210,000 in portfolio value due to Brunin’s“faulty attempts at market timing, reliance on faulty proprietary algorithms and overall risk taking and lack of diversification.”
At one point while Brunin was on vacation, the couple said their stocks were sold at a loss of over $200,000. By the time he returned, the lawsuit says, “the damage had been done, as all of their assets held in equities had been moved to cash assets by one of Defendant’s colleagues, none of whom are trading qualified, or by an automated trading system while he was out of office.”
The other couple filing suit, Zyk and Flanagan, also had limited experience with investing and gave Brunin and his firm nearly their entire savings, about $210,000 from the sale of their home, to invest.
Had Brunin ascertained their level of investment sophistication and risk tolerance and applied those factors, “only conservative investments should have been provided,” the lawsuit contends. Instead, their funds were placed into aggressive investments that were overconcentrated in small cap stocks, according to the plaintiffs.
This plan, along with an overly aggressive market timing strategy, is alleged to have resulted in a $25,000 decline in the couple’s portfolio value. Additional losses were caused when Zyk and Flanagan’s funds, after being moved to a money market account, were shifted into index funds and triple-leveraged index funds.
All the plaintiffs seek compensatory and other damages. Pederson said that the Elzeas had hoped for investments that would fund their retirement, but now “they’re retired, and they can’t get back into the workforce.”
Brunin did not immediately respond to a phone message or a message sent through a contact form on his firm’s website last Wednesday.
The financial broker misconduct attorneys at Lewitas Hyman are uniquely qualified to represent individual investors in investment-related claims against financial professionals and their firms in cases involving advisor misconduct. We understand how financial professionals and their firms are supposed to operate through decades of experience working for the SEC and firms like Morgan Stanley and UBS Financial Services. If you have suffered investment losses as a result of misconduct by your financial professional or their firms, contact Lewitas Hyman at (888) 655-6002 2 or through our online contact form for a free consultation.
