Check 'scam meter' before you invest - pressofAtlanticCity.com: Business

Check 'scam meter' before you invest - pressofAtlanticCity.com: Business

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Posted: Friday, June 26, 2009 3:10 am

When one of the largest investment frauds in U.S. history was uncovered late last year, the financial devastation that followed left people to question whether their money was truly safe.

After all, Bernie Madoff had managed to con thousands of people out of more than $50 billion through his Ponzi scheme.

Seniors are a favorite target of too-good-to-be-true financial swindlers, says Doug Shadel, director of AARP Washington, which has studied investment fraud.

"They worked a lifetime, and now they have money to spend," Shadel said of the seniors. "A lot of these investment victims who are 55 to 58, they have investment portfolios, and they start realizing that they don't have enough money to retire. They get into that mindset that now they have to take more risk to make back what they've lost."

While there are no hard numbers on how many people fall victim to investor fraud, Shadel estimates it is somewhere between 8 percent to 10 percent of the 95 million Americans who do some type of investing.

An AARP study found that victims for the most part were financially literate but could be easily persuaded, Shadel said.

The most basic advice law enforcement gives - at any age - is to be skeptical. Here's what you can do to protect yourself:

Do your homework

Before hiring a stock broker or investment professional, make sure he or she is reputable. The Financial Industry Regulatory Authority allows you to search its Web site (Finra.org/BrokerCheck) to see whether a securities firm or broker is registered with it, and whether there have been any regulatory complaints filed against them.

The Web site also has a "scam meter" and "risk meter," which allow you to determine whether an investment proposition may be a scam and whether you're at risk for falling for investment fraud. For more info, visit

www.finra.org/Investors/

ToolsCalculators

Ask questions

A financial planner can help you build your portfolio and give sound investment advice.

But to determine whether one is working in your best interest, ask them if they follow a "fiduciary" oath, meaning they put their clients' interests before their own profits and will disclose any conflicts of interest up front. It's not unheard of for a planner to sell an investor on a financial product they don't really need but will earn the planner a larger commission.

Before hiring advisers, ask them questions about their qualifications (are they a certified financial planner or a registered investment adviser?), how much they charge (be wary of an adviser who charges more than 1 percent or 2 percent of your assets) and whether they've been cited by a professional or regulatory agency for disciplinary reasons.

The National Association of Personal Financial Advisors suggests looking for a financial planner who charges on a fee-only basis for their consultation services and is willing to sign a fiduciary oath. Learn more at

www.napfa.org/tips_tools

Know the signs

As part of Madoff's Ponzi scheme, he sent investors doctored account statements and fake trade confirmations to make them think their money was being well-managed. In turn, they simply wrote checks out to Bernard L. Madoff Securities.

Mark Reimet, a financial planner with Ocean City Financial Group, said even when you're dealing with an independent financial adviser, statements should be coming from a legitimate company that may be supervising the adviser or a third-party custodian that you're making the investment through, like Vanguard or Fidelity.

"We're an independent financial planner here, but we're not a nonlicensed financial planner," Reimet said. "My business card at the bottom mentions who is supervising us (MassMutual Financial Group) and all of our clients' statements are coming from MassMutual. That's critical to know in the Madoff era."

In New Jersey, the state Bureau of Securities registers and regulates investment advisers and firms. Complaints can be filed at

www.njsecurities.gov/

compform.htm

or call 973-504-3600.

The bureau's list of the top 13 investment scams is available at

www.njsecurities.gov/

13scams.pdf.

E-mail Erik Ortiz:

EOrtiz@pressofac.com

© 2014 pressofAtlanticCity.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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