Your Best Defense Against Bogus Financial Planners May Be Your Phone

Here's a piece from Yahoo that details how a bogus financial advisor bilked some senior citizens out of $2 million. How did he do this? He drove an expensive car, wore nice clothes, and the like -- basically, he looked successful. So they gave him their money and he spent it in himself.

Other than the fact that people shouldn't simply invest with any Tom, Dick or Harry that gives them a smooth pitch (my suggestion is that you get a financial planner on a recommendation from someone you trust, someone who's doing well financially, and someone who's used the planner for a few years at least with a good amount of success), a key learning in this case is that these people could have easily avoided financial disaster by making one or two simple phone calls. The details:

Had the victims called their state securities administrator, they would have found that Baldo was not registered as any type of adviser. Had they contacted the national financial organizations, they would have learned Baldo never was a certified financial planner.

Yep. It's that simple.

Making a couple phone calls should only be a part of what you did to check out any potential financial planner. The piece concludes with this bit of advice that I totally agree with:

The moral of the story is simple: If you are hiring an adviser, don't be afraid to be demanding and difficult, to ask a bevy of questions, and to do your own research before giving your money to anyone. Do a thorough background check, and if something comes up amiss, ask more questions or simply run away.

Again, it's that simple. Remember, there are tons of people out there who are interested in making your money their money. If you want to keep this from happening, you have to do a bit of work upfront, before you hire anyone to manage your money. My preferred option is that you learn how to manage your own money so this never becomes a problem for you. A great place to start learning is by reading The 10 Best Money Moves You Can Make.

Comments

[Matt]

I have less faith in certifications than you do. From my perspective the most important advice is to never give money to invest to an independent financial planner or advisor. The only money you should give him is whatever you're paying him for his advice...the investment dollars should be sent to your broker.

That way, at least if you do get scammed, you're only getting scammed for the fee, rather than your capital.