A couple years ago the Department of Labor issued the Fiduciary ruling. The purpose of the ruling was simple; to require financial advisors to act in best interest of their clients. Unfortunately, the politics involved took a reasonable idea and created a confusing policy that is still tied up in the courts.
I support regulations that protect investors but I also recognize we must each take responsibility for our own financial safety as no level of regulation can stop all fraud. Here are just a few ideas I shared at a recent fraud seminar to assist in the effort to protect your money.
Understand that white collar criminals are called wolves in sheep’s clothing for a reason. They try very hard to look like one of the sheep as they blend in with the flock. They join clubs, service organizations and even church groups to gain credibility with other members. Do not trust someone just because they belong to a group whose members are generally trustworthy.
Investigate claims of credibility. Criminals may use impressive titles or official looking designations to create the appearance of importance. Not all titles and designations are the same and many have little or no value. Do some research to find out what a designation means and the qualifications to obtain it. Also make sure the person is actually an expert in the particular field in which you are investing. ie., I respect my CPA as my tax expert but I wouldn’t go to him for foot surgery.
Be careful of strangers bearing gifts. Timeshare salesmen skillfully use the law of reciprocity to make prospects feel obligated to buy their product. It’s ok to take a free meal or small gift from someone in exchange for listening to their pitch, but never let that make you feel obligated to buy anything.
Avoid the pressure of scarcity. Being made to believe that you have somehow been singled out for a special opportunity, or that an investment may not last long, is a definite red flag. If you don’t have time to do your proper research, then just say “no.” It is better to miss a few good ships if it means protecting you from boarding the Titanic in a last minute rush.
Finally, never become a gold-rusher. If you are being told that everyone else is making money on an investment except for you, slow down and do your own homework. Never invest just because someone else did or because others are seemingly making money without you. Make each investment decision based on its suitability to your unique situation. As with most gold rushes, when it’s over far more money is usually made by the guys selling the shovels.
Hopefully, as the Fiduciary rule gets sorted out, some solid investor protections will come from it. Remember however that no one, not even Washington, cares more about your money than you do and therefore you must be your own first line of defense in the battle against fraud.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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