The criminal world’s best and brightest minds have targeted people seeking the promise of high returns. According to Tom Ajamie, author of the book, Financial Serial Killers, “These financial scams are a quick way [for perpetrators] to make a lot of money and [are] more profitable than knocking over an old lady with a purse.”
Ajamie, managing partner of a Houston law firm, wrote his book, Financial Serial Killers, after winning a $429 million arbitration award against a broker in 2001.
Con artists make it essential for people to have a candid conversation with potential advisors about any fears they may have. According to Ajamie, your talk with an investment advisor should cover the following items:
- Be careful of “guaranteed” high returns. Yield-hungry investors want to invest their money in high-potential-return investments. Reaching for high return is often an invitation to disaster. Investments must be judged in terms of suitability, liquidity, transparency and whether you understand the product.
- Be careful of questionable new products. The boom in new products has given the criminal element an opportunity to create phony products, many of which fall into less regulated asset classes such as private placements and real-estate investment trusts.
- Use the web to research your advisor and their recommendation. Check online sites such as FINRA’s broker check and the SEC to research investment advisors. Be sure to Google the broker or advisor by name, as well as their investment recommendation, to see if there are any complaints or concerns.
- As clients get older, fraud becomes more of an issue. Encourage adult children to get involved. There are plenty of wonderful advisors, but unfortunately there are a lot of financial frauds out there.
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