Retirees Should Understand the Dangers of Investment Fraud

The elderly have long been a prime target for “fraudsters.” Crooks are more brazen and knowledgeable than ever and most of us don’t have time to keep up with all the new ways someone else can illegally get our money. That’s why it’s so important that retirees should understand the dangers of investment fraud.

Retirees should understand the dangers of investment fraud.

Retirees should understand the dangers of investment fraud

It was just about four years ago that the epic cons of Marc. S Dreier, R. Allen Stanford and the mastermind Bernie Madoff crashed down around them, along with the world’s financial markets. What have we learned? Now “may be a good time to ask whether you have done all you can to lower your risk of being caught up in a similar fraud.”

Protecting yourself against fraud, or simply bad advice, is easier said than done. The most common advice is to make sure your money is held by an independent custodian or firm whose job is to keep your money safe. That wasn’t the case with either the Madoff or Stanford fraud. But that is only one small step.

Here are some other things to keep in mind to avoid having your retirement fund gutted by some unscrupulous con artist:

The first step would seem to be picking an honest adviser. The good news is that only about 7 percent of advisers have disciplinary records, said Nicholas W. Stuller, president and chief executive of AdviceIQ, a company that evaluates advisers.

Ross Gerber, president and chief executive of Gerber Kawasaki, a wealth manager, said clients with sizable wealth should not trust it to any single adviser, no matter how good the adviser seems to be.

Mr. Gerber added that he would steer clear of advisers who didn’t want to share with other advisers what they had done for clients. “If Starbucks goes from $50 to $80, it’s easy to show them why it did well,” he said. “When you’re investing in these scams, they’re funds. You don’t see what’s in them. People don’t necessarily ask a lot of questions or they don’t care.”

In some cases, investors do not even know the questions to ask. Marc Odo, director of applied research at Zephyr Associates, a financial software firm, said he had been asked by a client whether a return could be so high or consistent for so long that it might signal a fraud.

I can’t stress it enough: Learn about investing — after all, your retirement depends on it — ask questions and remember — if it sounds too good to be true, it probably is. The better retirees — and the rest of us — understand the dangers of investment fraud, the safer our investments will be.

Click here to read more about what retirees should understand about investment fraud.

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