What Have We Learned From Madoff?
It has been a few years since the investment mogul, (Bernard Madoff), was caught in the midst of what has been stated as the largest and most elaborate Ponzi scheme to date. As a result of his demise, the world received an eye opening experience of the U.S. financial community. Now, more financial scams are finding their way into discovery because of the careful eye of the now informed consumer. Nonetheless, there are those who have not really caught on to what the signs are that indicate the possibility of a rip off.
There are underlying indications that, if they are not noticed, can lead the unaware investor down a path of great displeasure and loss. Whether you are a young investor or a soon to be retired person there are ways that financial advisers attempt to take advantage of an investor so they can earn more money. What is needed before entering into any type of agreement with a financial advisor or even an insurance agent is to ensure their credibility and their track record. Stating this means, just because someone has a series of letters behind their name does not mean they are what or who they say they are. In the case of a financial advisor, they should hold a registration with either the SEC, (Securities Exchange Commission), FINRA, (Financial Industry Regulatory Authority) or CFP, (Certified Financial Planner board), to name a few.
Questions to Raise
When dealing with an investment broker, advisor, or agent, how certain questions are answered can point out reasons not to work with those individuals. For instance, asking them what methods of compensation they work with, fee-based, or commission, as such if they outright refuse to discuss or even hurry through their explanation, this gives just cause to walk away immediately. The thing to keep in mind is that as an investor, you are the boss, which means, that the adviser works for you and should be completely transparent about how they are compensated for their services.
Looking into this aspect further, if they receive payments via commissions from selling products they need to prove there is no conflict of interests. What may occur is they would try to entice an investor to spend money on something that provides a higher commission for them. This is one issue when dealing with brokers or advisers that work with third party entities. It