As an Investment Advisor there is a fiduciary responsibility to be honest and forthright in all matters. It’s increasingly frustrating to see so many examples of Advisors who neglect these responsibilities to their clients, in order to enrich themselves. Here we have yet another story:
According to the article, this advisor lied about the amount of assets under management and the returns those assets were achieving. With the proliferation of financial data these days, portfolio models are a dime a dozen. Anyone can backtest to find the correct portfolio that WOULD have done well during the previous full market cycles. This doesn’t mean it will work in the future, as no one knows what the future will bring with any consistency.
I guess if we are reaching for bright spots, the only one here is that it doesn’t appear to be an outright ponzi scheme and so investors are still able to access their money. Investing is a difficult endeavor by itself. Investors do not need the additional stress of wondering if their advisor is legit or the investments being pitched to them are legit. To combat this, here are three simple steps to help avoid most of the fraud that is occurring these days.
The Financial Industry Regulatory Authority has developed a database that contains important information for you the investor. Anyone who is attempting to do business with you must be registered. So look up the name of the contact person and the firm he or she is representing first. If you can’t find them listed, it’s usually best to walk away. There are some instances where someone can sell certain securities without being registered, but these are few and far between. If you were to look through the disciplinary files at the SEC and State Securities Administration website, you would see that the majority of these fraud cases were because some unlicensed sales person sold some unregistered security that turned out never existed in the first place. Unfortunately a simple check on FINRA’s website could have negated many of these fraud cases.
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