investment fraud

Far too often I see or hear about people, especially celebrities and athletes (as they get all the media attention) falling victim to investment fraud. Recently an article about a former San Diego Padres pitcher, Jake Peavy, discussed some challenges he’s faced which included a fraudulent investment from someone he trusted. This article inspired me to provide a few tips to help reduce the chances of this happening to you or someone you know.


Do your research – When working with a financial professional do a quick online search. Websites such as Broker Check and Adviser Info are a good starting point. Personal references can be helpful, but I don’t suggest relying on them alone.


Understand where your money is going – Many financial advisors use third-party custodians such as TD Ameritrade (my preference), Charles Schwab and others. By using a third party the money is held at that company and the advisor manages the account on your behalf. A good rule of thumb is to never write a check payable to an individual for money you wish to be invested. (By the way, Bernie Madoff’s company served as its own custodian rather than using a third party)


Limit private investments – It seems that most cases of fraud that I see involve private investments. These are considered “non-registered” investments and therefore information is more limited. Examples often include start-up companies and real estate investments. I don’t mean to imply that private investments are bad, just know that they are generally less regulated and less transparent, therefore harder to research. They may tout high return potential but often involve substantial risk. I suggest limiting your exposure to these types of investments. 


Diversify – The idea of not putting all your eggs in one basket doesn’t prevent you from investing in something that could be fraudulent, however, it does provide some protection to your overall finances. 




Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

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