Midlands Business Profiles

Avoiding a Financial Scam

By Michael J. Oana

The recent series of high-profile financial scams uncovered in South Carolina is shocking and sad. As the chief investment advisor for a locally owned boutique investment firm, I’m disgusted when people get duped out of their nest eggs by operators long on slick talk but short on honesty.

But it doesn’t have to be this way. By adhering to these basic rules, anyone can dramatically decrease the likelihood that they will be the victim of a financial scam. Here is how:

Investigate:   Always do your homework first. Ask if the investment comes with a prospectus and insist on reading all the paperwork (including the fine print), before committing your money. You also may want to let your attorney or CPA check out the investment first.

Compliance: The laws regulating the investment industry are stringent for a reason—they’re supposed to protect you.  A person seeking your investment should be registered with either the Securities and Exchange Commission, the New York Stock Exchange or the National Association of Securities Dealers (which oversees 665,000 registered securities representatives). These entities write the rules for investment professionals and discipline those who fail to comply.

While some salespeople are not required to register with these entities, it’s better to be safe than sorry.

Relationship:  Get to know the salesperson.  How long have they been selling investments? What is their educational background? Ask them to put their track record in writing—the good ones won’t mind. If you feel like you’re being pushed into something you’re unsure about, walk away.

Diversify: Never put all of your eggs in one basket. Even the most crafty scam artist cannot destroy your life savings if you only give them a slice of your portfolio. Beware of anyone who suggests going “all in” on a single investment opportunity, even if the returns seem incredible.

Monitor: Consistently track your investments. Most investments are required to produce a periodic performance statement. Some firms offer web-based tracking so you can monitor your account and portfolio 24 hours a day. Contact the sales agent if the statement is not correct or it appears to be heading south.

Second Opinion: Shop around before you make any large investment. Talk with several advisors at different companies. Ask friends where they’ve had success.

Fees:  Insist upon understanding all the fees involved before you invest. Good firms will fully disclose any fees in advance and put them in writing.

Common Sense: Remember the old cliché: if an investment sounds too good to be true, it probably is.  High returns demand a high level of risk. If someone offers you a great return with little or no risk, he may be a huckster. Go with your gut if an opportunity just doesn’t feel right.

Making an investment can be a rewarding and possibly life-changing experience.  Good investment professionals want to ensure their clients know all the facts—and associated risks. Bad ones will throw up smokescreens to shield clients from the facts. Follow the above tips and you should be able to tell the difference. 

Michael J.  Oana 

Team Oana Investment Advisors, Inc. is an independent company
with securities offered through Summit Brokerage Services, Inc.,
member NASD & SIPC.