Why You Should Never Share Your Brokerage Account Password
Many people open brokerage accounts on platforms like E-Trade, only to quickly find themselves in well over their heads. While commercials and social media influencers make investing on your own look easy, the reality is that managing a profitable investment portfolio is anything but. Many people suffer substantial losses investing on their own, and, without someone there to tell them when to stop, they keep throwing good money after bad. They buy and sell at the wrong times, and then they make reckless decisions when they cannot afford the losses they have already incurred.
As a result, many people share their brokerage account passwords. Oftentimes, they will share with friends, online acquaintances, partners, spouses and other family members who offer to help them out. Unfortunately, this also often proves to be a very costly mistake.
Understanding the Risks of Sharing Your Brokerage Account Password
There are a few different risks involved with sharing your brokerage account password. Whether you are in the early stages of investing or you are hoping to recoup your investment losses, sharing your password is never a good idea. Here’s why:
1. The Person Who Has Access to Your Account Might Not Know What They’re Doing
In many cases, someone who has had a little bit of success investing on their own will offer to help their friends or family members. But, the simple reality is that past returns are not a guarantee of future success. Different investments behave differently, market forces shift, and people simply get lucky. As a result, many people who think they know what they’re doing do not, and they end up incurring losses for the people they offer to help.
Then, there are situations in which someone who offers to help has no experience at all. Whether they misrepresent their credentials or truly believe they can help, the reality is that they are in no better position to make sound investment decisions than the people who share their passwords. In these situations, things often quickly go from bad to worse—and then there is nothing left to do but move on.
2. The Person Who Has Access to Your Account Might Take Unreasonable Risks
Another reason not to share your brokerage account password is that if you do, the person who has access to your account might take unreasonable risks. They might do this because they don’t know what they’re doing, they aren’t investing with their own money, or both. Again, regardless of why someone else drains your brokerage account, at this stage, the damage generally cannot be undone.
3. In This Scenario, an Investment Fraud Lawyer Cannot Help You Recover Your Losses
This brings us to the third risk—which is the most important risk in many respects. When someone you trust with your brokerage account password loses your money, an investment fraud lawyer cannot help you. As unfortunate as your situation is, the laws that protect investors do not apply in this scenario. These laws establish disclosure requirements for companies, hedge funds and brokerage firms, and they establish legal duties for stockbrokers and investment advisors. They do not impose any requirements on your friends and family.
Plus, even if you had a claim, the likelihood of collecting any judgment you might eventually win in court is virtually non-existent. Companies and brokerage firms have substantial assets and liability insurance—your friend or family member who offered to help you invest most likely does not. In this scenario, your money is simply gone. Unfortunately, that’s the end of the story in the vast majority of circumstances.
Tips for Protecting Your Money When Investing on Your Own
If you have a brokerage account that you use to invest on your own, it is critical that you make informed decisions. There are no guarantees when you invest, and, even if a decision seems like the right one, you need to make sure before putting your money at risk. With this in mind, here are five tips from our lawyers for protecting your money when investing on your own:
- Do Your Research Before You Invest – Always do your research before you invest. If you don’t have a specific reason for choosing an investment and a specific plan for when to sell, you aren’t ready to invest.
- Never Buy an Investment Product You Don’t Understand – There are lots of types of investment products, including complex structured investments that even many brokers don’t fully understand. You should never buy an investment product unless you fully understand how it works and the market forces that can lead to gains or losses.
- Choose a Strong and Unique Password – When setting up a brokerage account, you should choose a strong and unique password that you don’t use for anything else. Weak passwords can easily be stolen, and your spouse or partner might be able to guess your password if you use the same one that you use for your email, social media accounts or bank account.
- Protect Your Password – Once you choose a password, you need to protect it. Do not write it in a note on your phone or a file on your laptop, and do not email it to yourself. Instead, if you are worried that you will forget, consider using a password vault. Use two-factor authentication if it is available.
- Never Share Your Password With Anyone – Finally, as we’ve hopefully made clear above, you should never share your brokerage account password with anyone. The risks simply aren’t worth it.
We Help Investors Recover Fraudulent Losses from Hedge Funds, Publicly-Traded Companies, Brokerage Firms, and Investment Professionals
At Zamansky LLC, we help retail investors recover fraudulent investment losses from hedge funds, publicly-traded companies, brokerage firms, individual brokers and other investment professionals. Unfortunately, if you have suffered investment losses as a result of sharing your brokerage account password with someone you thought you could trust, we cannot help you in this scenario. However, if you have lost money investing with a broker or investment advisor, you can call 212-742-1414 or contact us online for a free consultation.