Ponzi Still Lives
By Gary Silverman, CFP®
Every industry has crooks. The investment management and financial planning professions are not immune. Most know the name Ponzi, whose journeys brought him through the city of Wichita Falls. More recently, Bernie Madoff made some of the biggest financial fraud headlines of the last few decades. He was well-respected and admired in the financial and charity worlds, however, being famous and philanthropic does not prevent criminality.
My point is not to sit on my high horse and gloat over past illegal activities, but instead I want to talk about how to prevent this from happening to you.
Please note this might help — it will not prevent potential fraud. Crooks can be good at what they do. So good that even the most suspicious and intelligent can be hoodwinked. If it happens to you, you may want to kick yourself, but please remember who the guilty party is. That said, here are a few tips - some from me and some from the SEC (the financial one, not the football one).
Research your financial person. The Securities and Exchange Commission site, adviserinfo.sec.gov, is where you will find the registration information and history for financial advisors. If you see something of concern, ask about it. We all make mistakes, but we should fix them.
The SEC, Texas State Securities Board and FINRA (the regulatory authority over brokerages) all have articles about how to choose a broker or adviser, how to protect yourself from online and more traditional fraud, and more. Visit their websites to review the articles.
Here is a synopsis of the investment fraud Red Flags the agencies list:
- The professional is not licensed (you checked for that, didn’t you?).
- They emphasize how much better they are than anyone else.
- The offers sound “too good to be true,” promising massive returns that are often touted as “risk free.”
- They are aggressive, pressuring you to act immediately, often wanting a credit card or gift card to lock in the deal.
- These offers often come from someone you do not know (which should make you wonder why you are getting this amazing opportunity).
The vast majority of advisers are not crooks. Most truly do want to help you. Even those who just do it for the money do so legally. But money attracts thieves. The adage, Buyer Beware, is an adage for a reason.