When recommending investments to you, your broker must consider a proper asset allocation for your needs, based upon your particular financial situation, goals, risk tolerance and other material facts.  Asset allocation refers to the various classes of securities such as stocks and bonds. 

 Your broker also has a duty to also recommend appropriate diversification within each class of securities.  For example, many investors hold numerous stock positions in their portfolios; these stock positions should be properly diversified across various industries, so as to avoid an overconcentration in one industry or company. However, there is no “one size fits all” approach for every customer. Your broker must ‘know his customer’ and propose a proper asset allocation and diversification reasonably tailored for that customer. Sometimes a broker becomes over enthused about a particular security, and improperly allows the security to be concentrated across many of his accounts. More common is the scenario where the broker failed to carefully assess issues of asset allocation or diversification for your account.

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