Over the last few years, the broad markets have generally been on an upswing, which is great news for those planning for their retirements, business investments, education funding, philanthropic aims, charitable contributions and estate transfers. A major goal of investing is to build wealth, and many investments are based on knowledge and trust, so their merit and viability may not be questioned until they turn. But by then, it may be too late.
As you read news stories about once-respected companies engaging in dubious business practices, you should carefully review your own accounts for these warning signs:
1. Claims of high investment returns with little or no risk.
Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be extremely suspicious of any “guaranteed” investment opportunity, and look at the worst returns along with the best and the averages.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
2. Overly consistent returns.
Investment returns tend to go up and down over time, especially instruments seeking to always beat the market. Be wary of an investment that continues to generate regular, positive returns regardless of overall market conditions. If you are invested in a higher-yielding instrument, especially one that has a foreign domicile, then also be aware of the tax and filing consequences that may apply.
3. Secretive and/or complex strategies.
Avoid investments that you don’t understand or for which you can’t get complete information. Review the risks and fees involved.
4. Issues with paperwork.
Ignore excuses regarding why you can’t review information about an investment in writing, and always read an investment’s prospectus or disclosure statement carefully before you invest. Account statement errors may be a sign that funds aren’t being invested as promised. Also, you may be a victim of what was previously unthinkable: an unscrupulous business practice in which accounts are opened in your name without your authorization.
5. Difficulty receiving payments.
Be suspicious if you don’t receive a payment or have difficulty cashing out your investment, especially if you have been told differently. Keep in mind that Ponzi scheme promoters sometimes encourage participants to “roll over” promised payments by offering even higher investment returns.
If you begin to worry that your investments are showing signs of suspicion or even fraud, then it is imperative that you bring your concerns to a professional who can help you determine the proper steps, which may involve higher authorities. If you feel that an unscrupulous broker or financial planner has misled you, then you may have to contact that person’s branch or complex manager to lodge a formal, written complaint. You may have to take claims to binding arbitration.
If there is evidence of fraud, especially among multiple investors, then you could collectively contact the U.S. Attorney’s Office and/or the state securities regulator where you live or where the suspected crime originates.
Any suspicion of financial crime or commodities, investment, securities, mail or telemarketing fraud should be reported to one of more of the following:
- The Federal Bureau of Investigation (FBI) at 202-324-3000 or online at https://tips.fbi.gov
- The Securities and Exchange Commission (SEC) at 800-732-0330 or online at www.sec.gov/complaint.shtml, and/or
- The Commodity Futures Trading Commission (CFTC) at 866-366-2382 or online at www.cftc.gov/TipOrComplaint.
- The Federal Trade Commission (FTC) at 877-382-4357 or online at https://www.ftccomplaintassistant.gov/information?OrgCode=#crnt
- The Department of Justice (DOJ). This website can help you locate your U.S. Attorney: https://www.justice.gov/usao/find-your-united-states-attorney
The government takes financial crimes very seriously but can only act when alerted.
-
The Trump GOP Tax Bill Could Worsen California Cost of LivingState Tax Energy bills in the Golden State may shock you if Republican lawmakers in Congress remove certain energy tax credits through Trump's 'big, beautiful bill.'
-
The Best Covered-Call ETFs to BuyCovered-call ETFs can provide consistent, above-average income generation, but they can also cap potential upside. Here's what to look for.
-
Wealth Advisers: In Estate Planning, the End Is Just the BeginningWe need to keep the lines of communication with our clients open so that we can anticipate and help them navigate issues that arise over time.
-
Stood Up by a Radio Show: But Was It a Breach of Contract?A conscientious financial planner reschedules his clients after being invited onto a talk show and ends up losing one of them at a cost of $5,000. What does the radio show owe him, if anything?
-
Eight Estate Planning Steps to Protect Your Loved Ones (and Your Legacy)Two-thirds of Americans don't have an estate plan. If you're one of them, these are the essential steps to take now to prevent problems for your family later.
-
The Six Pros This Adviser Says You Need to Sell Your BusinessSelling your business isn't as simple as getting the best price and walking away. These are the six professionals you'll need to get a deal across the finish line.
-
The Three C's to Financial Success: A Financial Planner's Guide to Build WealthConsistency, commitment and confidence in your chosen strategy are more critical to your financial success than finding the 'perfect' financial plan.
-
A Financial Adviser's Guide to Solving Your Retirement Puzzle: Five Key PiecesIf retirement's a puzzle you're struggling with, try answering these five questions. The answers will guide you toward a solution.
-
You're Close to Retirement and Cashed Out: How Do You Get Back In?If you've been scared into an all-cash position, it's wise to consider reinvesting your money in the markets. Here's how a financial planner recommends you can get back in the saddle.
-
After the Disaster: An Expert's Guide to Deciding Whether to Rebuild or RelocateHomeowners hit by disaster must weigh the emotional desire to rebuild against the financial realities of insurance coverage, unexpected costs and future risk.
