We remember the pitches. Non-traded REITs sold as stable income tools with little downside. Brokers showed charts with 8% distributions and called them conservative. We knew better. Many of these products carried hidden fees, illiquidity traps, and risks that made them completely unsuitable for retirees seeking capital preservation.
Why non-traded REITs harmed conservative portfolios
Non-traded REITs do not trade on public exchanges, which means investors cannot easily sell shares when markets turn. Their valuations rely on internal appraisals that often lag real market conditions. High upfront fees, sometimes reaching 15%, get deducted before the first distribution ever hits the account. Retirees who needed liquidity found themselves trapped.
Several non-traded REITs have suspended redemptions, slashed distributions, or filed for bankruptcy in the past 18 months. Investors who thought they held bond-like stability discovered instead that they owned leveraged real estate exposure wrapped in complex fee structures.
Suitability rules protect retirement investors
Under FINRA Rule 2111, brokers must have a reasonable basis to believe that a recommended investment suits the client’s financial situation, risk tolerance, and investment objectives. Recommending a non-traded REIT to a retiree with a low-risk profile and income needs violates this standard. It also violates the duty of care owed to every brokerage customer.
Broker-dealers must supervise recommendations. When a firm allows its representatives to push illiquid, high-fee products to clients who cannot withstand losses, the firm shares responsibility for the outcome.
Common signs of unsuitable REIT recommendations
Concentration above 10% of a retirement portfolio in any single non-traded REIT is excessive. Brokers who emphasized yield while glossing over illiquidity and fee disclosures committed a material omission. Any sale made without a detailed explanation of early-redemption penalties and distribution sustainability deserves scrutiny.
Haselkorn & Thibaut fights for investor recovery
Haselkorn & Thibaut is a national securities law firm staffed by former Wall Street defense attorneys who now advocate for injured investors. We have recovered over $520 million in verdicts and settlements across thousands of cases. Our attorneys hold an AV Preeminent rating and bring more than 95 years of combined experience. We win 98% of our recoverable cases.
We charge no fee unless we recover money for you. Every investor who contacts us speaks with a partner who understands the defense playbook because we used to run it.
Contact Haselkorn & Thibaut today
If a broker recommended REITs that caused significant losses in your retirement account, you may have a claim. Call 1-888-885-7162 or visit htattorneys.com for a free, confidential case review.
Disclaimer: The information provided here is for general educational purposes only and does not constitute legal or financial advice. No attorney-client relationship is formed by reading this content. Past results do not predict future outcomes. Speak with a qualified securities attorney for advice regarding your individual circumstances.
