Last evening while channel surfing, I came across a television program on CNBC called “American Greed.” As I watched the stories of good people being defrauded by the “schemers” I thought of similar situations that have occurred recently in South Florida. In particular, I considered the incidents involving Bernie Madoff (financier) and Scott Rothstein (attorney).
The rampant nature of this type of fraud prompted me to outline some important tips for avoiding financial victimization:
1. Choose Wisely
Although the importance of getting recommendations from friends and colleagues cannot be underestimated, it is crucial to do your own homework on advisors, investments, etc.. In addition, do not simply accept that someone is honest because of their business affiliations, religious preferences or employer. These types of relationships do not ensure trustworthiness.
2. Investigate the Team Players
Your skepticism should not end with choosing an advisor. Your advisor should be disclosing the third party custodian of your investment funds, and monthly statements should be sent directly to you from that firm. Research the solvency and reputation of that firm. If your statements are sent directly from the advisor, something fishy is probably going on.
3. Stay in Control
It’s your money, so stay involved with how it is managed. Gathering investment advice from a trusted advisor with a proven reputation is important, but do not forget to review statements on a regular basis. Do not be afraid to ask questions, and be sure to understand why an advisor is recommending a specific investment.
I would also recommend never giving power of attorney to an individual advisor to make investment decisions without approval. Remember the old adage, “If something sounds too good to be true it probably is.”
Millions of dollars of securities fraud claims are brought before the Financial Industry Regulatory Authority (FINRA) each year. Whether you have lost money on risky investments, your account is traded excessively, or you have questions about the custodian of your investment funds, your rights as an investor may have been compromised. If you feel that you have been defrauded by your financial advisor, seeking legal counsel can help to protect those rights.