How to avoid investment advisor scams
While the news is full of stories of people who have been cheated by their investment advisor, there is also a list of guidelines that you can follow that will help make sure that this doesn't happen to you. These guidelines can help you protect yourself and your money, from unscrupulous investment advisors. It is important to keep, in mind that while there is a list of things you should never do with an investment advisor, this can not guarantee 100% that you will avoid problems, it will only reduce the chance of them happening. Investing is a risk; all the way from the money you spend, to the person who you choose to help you with it. If you cannot tolerate this kind of risk, then investing may not be for you. However, by using some common sense guidelines it can substantially reduce the risk of becoming a victim, of a financial fraud. Here is what you need to know about how to avoid investment advisor scams-
- Never begin looking for an investment advisor, until you have done a thorough assessment of your financial needs, and you know exactly the type of investment advisor that you need.
- Never start working with an investment advisor, before you have completely investigated his or her credential and background. This means that you will need to do the following-
1. Contact certification organization for a list of potential investment advisors.
2. Get referrals from friends and family, however, this should only be done if you know for sure that the person giving the referral has thoroughly investigated their investment advisor. In addition, this is best as well, if the person giving the referral has been extremely pleased with the services that have been provided over an extended period of time. Keep in mind that just because a family member or friend recommended someone, this does not mean that this is an ethical investment advisor. Some of the most recent and largest investment scams occurred because people who knew each other in some way, relied on each other for recommendation, trusting that someone had done the right checking. Sadly, this often means that no one checked which allows the unscrupulous investment advisor to get away with fraud.
3. You will need to interview at least 3-4 prospective investment advisors.
4. You have checked all references that have been given you. It is crucial that you are very thorough in this process. One of the most common misleading actions is to give potential clients references that are more from associates, rather then from other customers. You must be able to ask questions that will reveal any untruthfulness.
5. Always check an investment advisor's certification, registrations, and licenses. This can be easily done by using the websites of the state and national regulators. This will help to insure that your investment advisor has all of the necessary certification to operate in your state. At this point in the checking process, you should also make sure that they have not received any disciplinary actions.
6. Contact at least one of the educational institutions that the investment advisor says that he or she received a degree from. This way you can confirm that the person did attend the institution and received the degree.
- Never agree to work with any investment advisor without a written and signed contract. The contract should also specify the services that will be offered, the cost of the services and how the investment advisor will be paid.
- Never allow your service agreement with your investment advisor, to simply be transferred to another investment advisor, without your written consent. If this happens you should also be allowed to terminate your contract without a penalty fee.
