Pardon our bluntness, but FINRA and the SEC are not going to protect you from investment scams, bad financial advice, and deceptive advisor sales tactics. Even if they could protect you, their efforts would be after the fact, and your assets would be long gone or greatly reduced in value.
Only you can protect your assets, but if you are like most investors, you need a major wake-up call. You have to start
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Why have so many Wall Street firms paid hundreds of millions of dollars of fines for cheating investors? Why did tobacco companies lie to consumers for decades about the health hazards of smoking? Why do drug companies say dangerous products are safe?
Companies lie to protect revenues and profits. They tell gullible customers what they want to hear then executives manage their
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Every financial advisor in America claims to be an investment expert. They do not provide any type of track record that documents this claim. In the absence of documentation, these advisors know you have no way to invalidate their claims so they are free to make sales pitches that are designed to convince you they are real experts.
Less ethical advisors use sophisticated sales pitches to make
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We surveyed thousands of investors in 2009 to measure their awareness of bad financial advice. We were surprised to find more than 80% did not know how to identify bad advice before it had damaged them.
There are four primary reasons why so many investors are damaged by bad advice. First, most bad advice is legal. Second, financial advisors with strong sales skills are very adept
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Financial advisors do not have track records because the industry does not want them to document their results for two reasons. First, most advisors are paid to sell you investment products. They are not paid to produce competitive returns for your assets. And second, if they had track records, most of them would not be very good.
Consider yourself lucky if your
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There is a lot of confusion about the compensation of financial advisors. Should they be compensated with fees or commissions? How much are they paid? What services do investors receive for the money they pay them? Should advisors provide written disclosure for their compensation?
The confusion is no accident. It exists because Wall Street wants it to exist. This is because the financial services
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Very few investors know the critical importance of selecting an investment fiduciary as their financial advisor. That’s because the financial securities industry deliberately blurs the distinctions so lower quality sales representatives can sell you inferior investment and insurance products for big fees and commissions.
It is important to know there are two primary types of investment advisors and not one.
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The Certified Financial Planner (CFP®) designation can be of critical importance for reasons that are largely hidden by the financial services industry. That's because the industry allows anyone to call themselves a financial planner whether they have the necessary knowledge or not. But, they do not want you to know that. This means your planner could have three months of planning experience or is an insurance agent
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Bernard Madoff scammed 11,000 investors out of billions of dollars over a 20 year period. Many of his victims were sophisticated investors who should have known better. But, the reality is not even the SEC or FINRA knew about this scam.
The bottom-line is sophisticated scam artists can fool anyone. The more you know about the structure of scams the easier they are to avoid.
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Madoff
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Wall Street investment firms have a lot of business practices that they hide from investors, but one secret is dirtier than the rest. In fact, Wall Street firms spend hundreds of millions of dollars per year on lobbyists and advertising to make sure this three part secret remains hidden.
Part One of the secret is the exceptionally low minimum standards that Wall Street has created for financial advisors. Keep
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They are not the advisors who bought you a "free' lunch or invited you to attend a "free", no strings attached seminar. They are not the advisors who buy free drinks at the bar or have the lowest handicaps at a local country club. And, they are not the advisors who are members of social clubs or churches so they can meet you.
Except for playing good golf, these popular tactics are used by lower
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In case you are not familiar with the acronyms: Financial Industry Regulatory Authority (FINRA) regulates 5,000 broker/dealers and 675,000 investment representatives and advisors who hold securities licenses. The Securities & Exchange Commission (SEC) regulates thousands of investment advisory firms, mutual fund companies, and the securities markets.
FINRA is a Self Regulatory Organization which means the
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You will dramatically reduce your exposure to investment scams and bad financial advice if you learn to ask the following seven questions before you select a financial advisor. You will have additional questions, but make sure you always ask the ones on this list.
1. Can you prove you are licensed to provide investment advice, services, and products?
You want a “Yes” answer. However, you
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Think about selecting a financial advisor as a contest and there is only one winner. On one team there is you and your family. You want to achieve your financial goals. On the other team are financial advisors. All too often, their goal is maximize revenues and personal incomes. If you select the right advisor, you win. If you select the wrong advisor, you lose.
Your team needs a
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Have you ever wondered why so many sophisticated people fall for investment scams, select low quality advisors, buy bad investment products, and tolerate poor investment returns for long periods of time?
For most investors, the answers can be found in the twin demons: Ignorance and Apathy.
Demon One: Ignorance
Most people don’t know how to manage assets. Why should
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Illegal investment scams have received a lot of publicity since Bernie Madoff turned himself in to the authorities. But, most investors do not believe they will be impacted by illegal scams. What has not received a lot of media attention are "legal" investment scams that created hundreds of billions of dollars of annual losses for investors.
You might be asking how a scam
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