Tag Archives: scam

Scary Headlines and bad advice.

I was listening to the car radio the other day and hear an ad by someone who was predicting the end of the financial word. After listing the all the things that will go wrong, he promised that if you invested with him you could enjoy all the gains of the stock market but would not risk losing a penny.

Sound too good to be true? Of course it is, but it works by appealing to people who want to believe that there’s such a thing as a free lunch.

I was reminded of that radio commercial when I read this article by Gil Weinreich at Seeking Alpha:

All investors are looking for astute analysis, but in order to appreciate it when you see it, it is worthwhile considering what bad analysis looks like. Jeff Miller does just that, critiquing analysts who make spurious connections between long-term economic trends and specific portfolio recommendations. I’ve seen scary headlines to this effect offering “sell now”-type advice in 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017 up until today. Even though such analysts had all kinds of valid concerns, investors following the serial bad advice have missed out.

When seeing representative articles from this genre, I ask myself what manner of benevolence prompts a writer to offer ever fresh warnings of doomsday. What’s going on with these analysts? Jeff hits the nail on the head. I quote in pertinent part:

Their business model seems to be one of supporting the insatiable appetite for confirmation bias from investors who have misjudged the market. Unfortunately, many average investors stumble on these sources and take the material seriously. They do not know about past errors or track records.

You never see a retraction or admission of an error. The only clue is that these sources monetize their audience with a ‘solution’ to fear – gold, annuities, a no-fail trading system, or some other seductive, high-commission product.”

The point is a critical reader must understand not just what an author’s main point is, but what is his interest in writing the article. This is not to say that someone with a point of view and a business interest should be ignored. Such a combination often prompts very good content. But understanding these elements can help you evaluate the analysis. Is it tendentious or is it instructive? Strong financial communicators educate; salesmen agitate.

There is so much bad advice generated by the media that it pays to ask what’s in it for the advice-givers. Too often it’s a fat commission on a product that is deceptive.

 

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Harsh Lessons In Modern Con Art

There have been a lot of articles about the fact that Seniors are often the subject of financial fraud, and it’s true.  But you don’t have to be old to get scammed.  Most of Bernie Madoff’s victims were rich, successful and relatively sophisticated.

Here is the story of financial writer, public speaker and financial thought leader, Mitch Anthony, who was scammed out of $1 million and whose mother lost her life savings.  It’s an object lesson.

As I sit down to write this article, I know it will likely be the most difficult composition of my writing career—difficult because it dredges up a miasma of regret, embarrassment, sadness and anger like nothing else I’ve experienced in life. I was conned out of almost a million dollars.

I will survive. But my mother was also conned—out of every penny she had. Her journey would prove much more difficult. The recollection of what I’m about to detail makes me feel stupid and gullible, like a sucker who should have known better. Then there’s the exasperation and indignation of watching someone skirt justice for one simple reason: There wasn’t ample time to hold him accountable for the fortunes he destroyed and the lives he crushed.

The federal statute of limitations on financial crimes is five years. Once you discover you have been defrauded, very likely two to three years have passed. Legal proceedings will chew up a year or two. By the time prosecutors decide there is merit in proceeding, the time has almost run out, and they will cease their efforts knowing they are up against the statute. This was our exact experience. By the time I brought the fraud to the attention of the FBI, they informed me that the perpetrator was already “on their radar”—but at this point, there wasn’t enough time left to do anything, and they couldn’t afford the time and resources to waste their efforts.

The man’s name is Wendell Corey, and he touted himself as a “developer.” Continue reading

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New Scam Tricks Advisors Into Giving Up Clients’ Money

Financial fraud has always been a problem, but the Internet has enabled entirely new ways of stealing money. We recently received an alert about a new scheme to defraud advisors and their clients.

The scam begins with an email to an advisor that includes a bogus invoice. The email appears to come from a client, and it includes a request to send money directly to the business listed on the invoice. The invoice might appear to be for purchases such as antiques or art, or for such things as attorney fees or legal settlements. The advisor sends the money, and the fraud is complete.

The payee is often in a foreign country or at an overseas bank. This makes it nearly impossible to catch the thieves or reclaim the money. The FBI estimates that more than 2,000 victims lost more than $214 million to this scam between October 2013 and December 2015.

My firm has a policy of not sending clients’ money to third parties based on email communication alone. But we go beyond simply confirming client requests by phone. It is our policy to get to know our clients personally. We know if they have a pattern of sending money to third parties. In all cases, we require a written letter of authorization as well as verbal confirmation from the client before any money is sent out.

The recent news that personal information about more than 20 million government employees, contractors and others was stolen highlights the importance of the security of your financial information. It also makes dealing with a financial firm where you are an individual, not a number, increasingly important.

NOTE: We recently submitted this article to NerdWallet who posted it on their Advisor Voices board.

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