Robo-Advisor Negligence Demand Letters

[Date] Legal and Compliance Department [Robo-Advisor Company Name] [Address] Via Email: [compliance@company.com] Via Certified Mail Re: Demand for Compensation - Unsuitable Investment Advice and Fiduciary Breach Account Number: [Account Number] Account Holder: [Your Name] Claimed Damages: $[Amount] Dear Legal Department: I represent [Investor Name], who suffered investment losses of approximately $[Amount] due to [Company Name]'s breach of fiduciary duty and provision of unsuitable investment advice. This demand letter outlines the misconduct and requests compensation to resolve this dispute without formal arbitration proceedings. ACCOUNT RELATIONSHIP My client opened an account with [Company Name] on [Date], depositing $[Initial Amount]. At account opening, my client completed your risk tolerance questionnaire and provided the following investment profile: - Risk Tolerance: [Conservative/Moderate/Aggressive] - Investment Timeline: [X years] - Primary Objective: [Growth/Income/Preservation] - Age at Opening: [Age] - Annual Income: [Income Range] - Net Worth: [Net Worth Range] - Investment Experience: [Beginner/Intermediate/Advanced] Based on this profile, my client reasonably expected a portfolio appropriate for [his/her] stated conservative/moderate/aggressive risk tolerance with a [X]-year timeline. UNSUITABLE PORTFOLIO ALLOCATION Despite my client's [conservative/moderate] risk profile, [Company Name] allocated the portfolio as follows: Initial Allocation: - [X]% Equities (including [specific funds/ETFs]) - [X]% Fixed Income - [X]% Alternatives/Other This allocation was unsuitable because: 1. The equity allocation of [X]% exceeded what is appropriate for a [risk tolerance] investor with a [X]-year timeline according to industry standards and [Company Name]'s own published guidelines for [risk tolerance] portfolios. 2. The portfolio included [specific unsuitable holdings - e.g., high-volatility funds, concentrated positions, inappropriate alternatives] that were inconsistent with my client's stated objectives. 3. [Company Name] failed to adequately explain the risks of this allocation or provide meaningful opportunity to adjust before implementation. [Alternative claim - Algorithm Error:] On [Date], [Company Name]'s algorithm executed [describe error - e.g., improper rebalancing, failed tax-loss harvesting, erroneous trades] that resulted in [describe consequence]. Specifically: - [Date]: [Description of erroneous action] - Result: [Quantified loss or tax consequence] This error violated [Company Name]'s duty of care and caused direct damages of $[Amount]. [Alternative claim - Disclosure Failure:] [Company Name] failed to disclose material conflicts of interest, including: 1. [Revenue sharing arrangements with fund companies] 2. [Preference for proprietary funds over lower-cost alternatives] 3. [Cash allocation practices generating revenue for the platform] These undisclosed conflicts violated [Company Name]'s fiduciary duty of loyalty and SEC disclosure requirements. Had my client known of these conflicts, [he/she] would have [chosen a different portfolio/different platform/etc.]. LEGAL BASIS [Company Name] is a registered investment adviser subject to fiduciary duties under the Investment Advisers Act of 1940. The SEC has clarified in IM Guidance Update 2017-02 that robo-advisors must: - Gather sufficient information to provide suitable investment advice - Ensure algorithms are designed to provide suitable recommendations - Disclose limitations of algorithmic advice - Maintain meaningful human oversight of automated systems [Company Name]'s conduct violated these requirements and breached the fiduciary duties of care and loyalty owed to my client. [If FINRA member:] Additionally, as a FINRA member firm, [Company Name] is subject to FINRA Rule 2111 (Suitability) and Regulation Best Interest, which require reasonable basis to believe recommendations are suitable for the specific customer. DAMAGES My client suffered the following damages: 1. Portfolio Losses: $[Amount] - excess losses compared to a properly allocated [risk tolerance] portfolio during the same period 2. [If applicable] Tax Damages: $[Amount] - unexpected tax liability from [describe issue] 3. [If applicable] Fee Refund: $[Amount] - advisory fees paid for unsuitable advice 4. Total Claimed Damages: $[Amount] The damages calculation is based on comparison to [benchmark index / properly allocated portfolio model] and accounts for general market conditions during the relevant period. DEMANDS 1. Payment of $[Amount] representing my client's damages from unsuitable advice; 2. Refund of $[Amount] in advisory fees paid during the relevant period; 3. Correction of account records to reflect appropriate risk classification; 4. Written acknowledgment of the suitability failure and remedial steps taken. RESPONSE DEADLINE Please respond within twenty-one (21) days with a substantive proposal to resolve this dispute. Failure to respond satisfactorily will result in: - Filing of arbitration under [your agreement's arbitration clause - FINRA/AAA/JAMS]; - SEC complaint regarding fiduciary and disclosure violations; - [State] securities regulator complaint; - Referral to attorneys pursuing class action claims against [Company Name]. My client prefers to resolve this matter efficiently and reserves all rights and remedies under federal and state securities laws. Sincerely, Sergei Tokmakov Attorney for [Investor Name] owner@terms.law Enclosures: - Exhibit A: Risk Tolerance Questionnaire and Results - Exhibit B: Account Statements and Portfolio Allocation History - Exhibit C: Damages Calculation and Benchmark Analysis - Exhibit D: Marketing Materials and Disclosures