How can you make sure your financial advisor can’t run off with your money?

I read an article today about how an investment advisor in Mound, Minnesota has basically run away with $1,000,000 in a matter of two years with as many as a handful of victims. They promised to double the money in a year or two, claimed to be using a trusted brokerage firm, and they were claiming to use a unique strategy with buying options in the stock market. Little did the victims know that the check they just wrote went to by a Maserati the same day! Here are a few simple steps you can take to make sure you are working with a financial advisor you can trust without worrying about a Ponzi Scheme.

Go to www.BrokerCheck.com

BrokerCheck is run by FINRA, which is a pseudo government regulating body that all investment advisors must register through to be able to sell securities to the public. If they claim to be investment advisors or financial advisors and they are not registered, that should be your first red flag. Not all the time will the individual be licensed to sell securities, such as stocks and bonds, they may just be licensed to sell insurance products such as annuities or life insurance products. In that case, they are neither an investment advisor or a financial advisor, they are strictly an insurance agent.

Another similar site is www.investor.gov

Investor.gov is very similar to BrokerCheck and essentially does the same thing. One thing you can also do is search based on the firm name. The person that is an investment advisor may not be fully registered but their firm might be. You really want both to be registered to eliminate red flags.

Make sure your money is going to a reliable custodian or carrier.

A custodian is a company that is holding on to your money or equities. Companies like Fidelity, Charles Schwab, TD Ameritrade, to name a few, are all reputable custodians. That way the investment advisor can’t fake the accounts because the custodians do the reporting. Whenever you write a check or move money to be invested, you want to make sure it is going directly to that custodian, not to the investment firm. The other benefit is that it typically is your account, not the investment advisor or investment advisor firms account. If you want to take money out of the account, you can do so without calling your financial advisor.

Only give them limited control

There was a recent article about a famous NFL football player who filed a lawsuit against his financial advisor and the firm he was with because the financial advisor essentially spent $15 million for his own personal use. The mistake the football player made was allowing his financial advisor to have the full power of attorney over his account. Giving the financial advisor full power of attorney allowed him to withdraw money out of the football player’s account without his consent. Make sure your account is set up so that the advisor can only make trades within the account and can’t move money out of the account.

“If it’s too good to be true, it usually is!”

I received an email from an advisor that wants me to invest with him. He calls himself a “Wealth Advisor” and will supposedly tell me what his secret is. He calls the investment “crash-proof” and said that if I have a $1 Million that in seven years I will have almost $6 Million. I tried to do some research on him and learned that neither he nor his firm is registered as an investment advisor. He also has “testimonials” on his website and videos which are a big no-no in our industry. The point of telling you this is to not get sucked into something that is probably all made up. If it sounds too good to be true, it usually is, so RUN!

Following these simple rules will keep you from making mistakes and losing potentially all of your money to someone that is going to buy a yacht or nice car. Before you invest with anyone, make sure that you do your research. You want to make sure your money will be there for you when you need and want it. Fortunately, there are tools to help protect you, make sure you are using all of them.

Video Transcription

Hi. Vince  Oldre, certified financial planner. I want to talk to you about a recent article I just read about a financial advisor stealing their client’s money. I want to make sure that you can avoid those same problems. We already know about Bernie Madoff and the issues that he’s caused through all the ponzi schemes but they still exist today and you really do have to watch out for yourself. Hi. Vince  Oldre, certified financial planner. I want to talk to you about a recent article I just read about a financial advisor stealing their client’s money. I want to make sure that you can avoid those same problems. We already know about Bernie Madoff and the issues that he’s caused through all the ponzi schemes but they still exist today and you really do have to watch out for yourself.  There’s a recent article talking about a gentleman in Minnesota that stole about a million dollars from his clients over the last two years which is a lot of money. One of the things that he did is he basically took the money, put it into his own checking account, and he used it. Well even one scenario, he took $100,000 from a client, turned it around and went and bought a Maserati. This is a really, really nice car. I want to make sure you can protect yourself from those same potential problems. There’s some things you can do to make sure you will avoid those issues. The first thing to do is do a broker check or make sure they are a registered investment advisor or an investment advisor that is registered with the securities exchange commission. What you can do is you can go to brokercheck.com. At brokercheck.com you can enter in the person’s name or even their firm to make sure they are registered. Another good site to go to is investor.gov. It does basically the same thing that brokercheck does and even while you’re there, you can see what type of report will come up as far as if they have any blemishes, if they have any problems in the past, are they an advisor that has a lot of disputes. Right there will give you a lot of information but also some red flags. If they are not registered as an investment advisor though the securities exchange commission, they’re not allowed to do any trading of stocks, bonds, mutual funds, exchange rate funds and really they’re not allowed to give you much financial advice.  The other thing you can do is to make sure you money is going directly to the custodian. If you’re going to write out a check for the advisor to invest, make sure it’s going directly to a custodian that you know of. For example, you write a check to TD Ameritrade or Fidelity or Charles Swab, you know they’re a reputable firm and you know that your money is going to be at that firm instead of in the financial advisor’s checkbook. The nice thing about Schwab or TD Ameritrade or any big financial institution or custodian is that you can’t fake the reports. The financial institution or the custodian essentially is going to send you your reports on your accounts. That way, a financial advisor like Bernie Madoff won’t have someone in a back room making up reports. That’s why you want to make sure that you have a custodian that you know of or that you have heard of as well as do a credit check on that custodian, as well. Now there’s some other things you can do besides those few things. Another thing you can do just to make sure they are doing the right things and that is to make sure that they’re actually giving you advice that you can believe in. The number one rule is if it sounds too good to be true, it usually is. So you want to make sure that whatever they’re talking about, they can really back that information up. They can do that by some of the historical reporting they should have and the historical reporting must be registered through some other third party corporations to be able to actually put it in front of you.  These are just a few things to make sure that your money is protected but also making sure that some financial advisor won’t be able to run off with it. Last thing I want to tell you is make sure that you do not give them a power of attorney to actually on your behalf. There was a famous football player that recently is suing a financial firm as well as a financial advisor because the financial advisor basically took all the money out of his retirement accounts or his brokerage accounts and used it for himself. You want to make sure that the advisor has limited control of your accounts.  With all those things, I know there’s some more things you can look at but those things are a pretty good way to make sure that you’re going to be relatively safe as far as making sure you’re not in a ponzi scheme and you’re making sure your money won’t be taken out of your accounts. That way, when you want the money, you need the money, the money is there.  As always, I’m open to all types of questions so if you have any questions, feel free to reach out to us and we’ll be sure to answer more questions. If you want to attend one of our events, make sure to do so my going to our events page on our website and sign up for one of our events. I look forward to seeing you. Until next time, we’ll see you then.

How Can You Make Sure Your Financial Advisor Can’t Run Off With Your Money?
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