Don’t fall prey to retirement scams

http://www.marketwatch.com/story/dont-fall-prey-to-retirement-scams-2014-04-01

 

As Alan Greenspan said, “Any informed borrower is simply less vulnerable to fraud and abuse.” The same holds true for investors.

As time marches on and the generation of baby boomers approaches retirement age, there has been a big push in the investment community to cater to its needs. Most professionals have the best of intentions and provide good advice and planning for this segment of the population. However, as is usually the case, there are also many “so-called” professionals pushing all kinds of schemes that ultimately take advantage of the client and cause them much financial harm.
This problem has become so widespread that the Financial Industry Regulatory Authority, or Finra, regularly issues alerts urging investors to be careful, along with a list of tips for avoiding getting ripped off.
Sounds too good

One of the first danger signs is a promise of unrealistic returns. For example, a few years ago large-print advertisements appeared in the local Israeli media offering a seminar about a financial system that supposedly returned over 50% a year to its investors. After checking out the company, I found that the company logo featured an old woman reading the finance page and smiling, as if she is having huge success and making tons of money. This only added to the unethical nature of this company, which was clearly preying on vulnerable, unsuspecting individuals.

Additionally, always be suspicious of promises of above normal returns. Furthermore, if an adviser refers to “guarantees,” rather than “averages,” this is another reason to be wary. It is also important to steer clear of any mail, whether real or virtual, claiming that you have won a foreign lottery or informing you that if you send some personal information and maybe a bank account number to a person in Nigeria or London, millions of dollars will be transferred into your account. (I would be a billionaire now if it was true!)

While this warning may sound elementary, I personally know at least 15 people who thought this was real and they even started sending personal information; one even got on a plane to London to meet the scammer at a bank to “claim” his money.

Mass emails

Finra reports that there has been a big increase in email pump-and-dump schemes.

“Email stock spamming is back in high gear. The latest McAfee Threats Report confirms a steep rise in spam email linked to bogus “pump-and-dump” stock schemes designed to trick unsuspecting investors.

For years, fraudsters have used large-scale email pushes (what most of us call junk email, or spam) to lure potential victims into investment scams. Many of these emails tout a company’s stock — typically small, so-called “microcap” companies — through false and misleading statements to the marketplace.”

I personally can attest to this as my junk folder is full of these tiny companies all about to change the way we compute with brand new cutting-edge technology. Not.

Licensing

It is vitally important to remember that one should only work with an adviser who is licensed. This will help to ensure that the client receives the appropriate advice that he needs, as well as providing a legal outlet for any potential complaints. Your adviser should also preferably speak your language and understand your situation. Regulatory agencies like Finra’s BrokerCheck, have made it quite easy for individuals to check if their adviser is licensed and in good standing.

Your account

Unless you have invested in some kind of private investment vehicle, always request official monthly and/or quarterly statements from your firm. An investor should be suspicious if these statements look as if they have been produced manually. For example, I once had a client who received very sporadic manual statements, and whenever he asked his adviser how much money his account was worth he would always get a vague answer. If you are in a private investment vehicle, this is understandable because it isn’t always so easy to calculate each investor’s holding. But if you are investing in a regular account and your adviser can’t tell you what your account is worth, something is going on.

If you are already retired or approaching retirement, you need to protect your earnings. After all, you’ve worked hard for your money, and it is time to let your money work for you. Chances are that this is all the money that you will have and it needs to last as long as you do.

Be smart, and don’t fall prey to someone who has only his best interest at heart.