“Elderly Client Loses 70% of Retirement Savings Due to Risky Financial Practices by Colorado Investment Advisor”
In a shocking turn of events, a Colorado investment advisor and his wealth management firm have come under fire for engaging in risky financial practices that resulted in an elderly client losing more than 70 percent of his retirement savings. According to a consent order issued by the Colorado Securities Division, James McGehee and his firm, McGehee Wealth Management Inc., managed over $3 million in assets for approximately 20 clients.
The state alleges that McGehee and his firm breached their fiduciary duty by recommending high-risk options trading strategies that were not in the best interest of their clients. Options trades, while offering leverage to investors, can also be incredibly risky, with the potential for significant losses. These trades have heightened suitability and disclosure requirements and are generally only recommended for experienced investors.
The state revealed that over 90 percent of the trades recommended by McGehee’s firm between April 1, 2019, and October 20, 2023, involved these risky option trading strategies. One particular client, a 76-year-old retiree living mainly on social security, saw his IRA managed by McGehee plummet from $205,167.66 to $18,293.70 between June 2021 and December 2022, losing approximately $160,000 in the process.
Colorado Securities Division Commissioner Tung Chan expressed grave concern over McGehee’s actions, stating, “Through our licensee examination program, we found that James McGehee and his company McGehee Wealth Management Inc. recommended unsuitable investments and failed to disclose key information to his clients.” As a result, McGehee has admitted to investment adviser fraud and agreed to the permanent revocation of his and his firm’s licenses, as well as a ban on ever being licensed in Colorado again.
The sanctions imposed on McGehee include the permanent revocation of McGehee Wealth Management Inc.’s Colorado investment adviser license and McGehee’s investment adviser representative license. He is also permanently barred from reapplying for any securities license in Colorado and prohibited from making recommendations or advising clients in, or from, Colorado regarding securities.
Should McGehee violate the consent order, he would face further sanctions and legal action from the state. This case serves as a stark reminder of the importance of due diligence and transparency in the financial industry, as well as the need for investors to carefully vet their advisors and ensure that their interests are being prioritized.
The repercussions of McGehee’s actions are severe, not only for the affected clients but also for his own career and reputation. It is a cautionary tale that highlights the potential consequences of engaging in risky financial practices and the importance of upholding ethical standards in the world of wealth management.