As a financial analyst and legal expert with over a decade of experience, I’ve seen my fair share of cases involving bad financial advisors. The recent complaint against Bart Harrison, a Trussville, Alabama-based advisor with Legacy 1031, is a prime example of the serious consequences investors can face when working with unethical or incompetent advisors.
According to the complaint, filed in May 2024, Harrison failed to inform his client that their Delaware Statutory Trust (DST) investment would be converted into an Umbrella Partnership Real Estate Investment Trust (UPREIT) after two years. This lack of transparency is a serious violation of an advisor’s fiduciary duty to their client.
DSTs and UPREITs are complex investment vehicles that allow investors to pool their funds for real estate purchases, often through 1031 exchanges that defer taxes. However, UPREITs come with additional risks and limitations, such as:
- Investors become limited partners, losing control over their investments
- Potential tax implications when selling partnership units or when the partnership sells the real estate
As a financial advisor, it is crucial to fully educate clients on the risks and details of their investments. Failing to do so can lead to severe consequences for both the investor and the advisor.
Harrison’s Background and Broker Dealer
Bart Harrison has been in the securities business for over 28 years and is currently registered with Concorde Investment Services. His extensive experience includes positions at various firms such as Emerson Equity, Moody Securities, and Wells Investment Securities.
Despite his lengthy career, Harrison’s BrokerCheck report reveals one recent investor complaint, which is a red flag for potential clients. It’s essential for investors to thoroughly research their financial advisors and be aware of any past complaints or disciplinary actions.
FINRA Rule Violations and Consequences
The alleged actions of Bart Harrison violate FINRA Rule 2111, known as the “suitability rule.” This rule requires brokers to have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer, based on the customer’s investment profile.
Failing to disclose material information about an investment, such as the potential conversion of a DST to an UPREIT, breaches this rule and the trust between advisor and client. The consequences for such violations can be severe, including:
- Fines and penalties
- Suspension or revocation of licenses
- Damage to the advisor’s reputation and credibility
Lessons Learned
The complaint against Bart Harrison serves as a cautionary tale for both investors and financial advisors. As the famous investor Warren Buffett once said, “Risk comes from not knowing what you’re doing.” Investors must educate themselves on the risks and details of their investments, and advisors must be transparent and thorough in their explanations.
It’s worth noting that, according to a study by the University of Chicago, 7% of financial advisors have been disciplined for misconduct. This statistic highlights the importance of due diligence when choosing an advisor.
In conclusion, the case of Bart Harrison and Legacy 1031 demonstrates the potential pitfalls of working with unethical or incompetent financial advisors. As an investor, it’s crucial to research your advisor’s background, ask questions, and stay informed about your investments. And as an advisor, prioritizing transparency, suitability, and client education is the key to building lasting, trusting relationships with your clients.
Financial Advisor Complaints 