Investment advisor Fredrick D. Scott has pleaded guilty to defrauding investors and lying about his assets under management. The New York money manager has stolen millions of dollars from his clients after promising them outstanding returns and after promising to give multi-million dollar loans for a fee. What ended up happening is Scott would take the money from investors, and then simply spend it on himself and his family. There were no returns given, no investments made, and no loans issued. You can read all about what happened on the SEC press release.
We all know the story of Bernie Madoff. His scheme was to make it look as though the investors were getting great returns on their money. Even with his elaborate scheme, it is beyond me how any of these individuals can think that their plan will work. These are obviously very smart people, and many of them get away with their scam for years before it comes crashing down around them. But for someone to simply take all of the money given to his investment company, and never give a return or anything, means there is some disconnect of these people’s knowledge and their common sense. The good news is that he is no longer stealing; the bad news is that many people have lost money along the way.
Any financial advisor that is doing his job correctly will not promise a specific return on your investment (unless you are buying CD’s or another product that is guaranteed). Any financial advisor, which is not lying to you, will never promise a return on all of your investments; they all carry some sort of risk. But there are some that are less than scrupulous that show big returns in past months and years, yet fail to show the down years that balance out the good years.
You can protect yourself from fraud in a number of ways. First, always make sure to do an FINRA broker check before hiring an advisor. It is quick and easy, and could save you from losing your life savings. Second, always do some research on the firm and see if there are any complaints before handing over your money. Finally, go with a trusted advisor that has been recommended by a friend or a family. There will always be bad apples out there, but by doing your homework you can avoid them.
If you do not want to trust anyone with your money, you can always manage it yourself. Platforms such as E-Trade, Scottrade, and TD Ameritrade (amongst others) let you manage your own investments without a broker or financial advisor. But if you do hire an advisor, check his or her fees first. Most should be charging around 1% to manage your money. If they are charging much more, you will want to question whether you are getting enough value. Be sure to check out PrimeRates to see the wealth great information available on how to build your own portfolio.
Fredrick D. Scott is not stealing money any longer. However, there are still more out there that are stealing and still getting away with it. As long as investing is a way to scam people out of a lot of money, these stories will keep surfacing. Protect yourself by knowing the red flags such as promised returns, incomplete information, a rush to make a decision, and inability to find background information. If you are not sure, don’t invest with that person until you are certain that you can trust them.
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