The sales person may have a nice office, dress well, drive an expensive car and look successful. They may seem confident and knowledgeable ... experts in a variety of types of investments. They will probably also come prepared with lots of facts and figures that sound impressive.
Best of all, they have a great investment idea and, because they like you and want to help you out, they will let you in on it. This all sounds wonderful, but is it?
Who is Most Like to Fall for a Crooked Investment Adviser?
According to FINRA, the Financial Industry Regulatory Authority, consumers who have investment experience are more likely to fall for fraudulent deals. They have also found that men are more gullible than women (sorry guys). Often, the victims of fraudulent investment deals are the very people who feel confident that they understand the risks and the complexities of the deal, and they are sure that they have made a great decision. It is not unusual for victims to be shocked and go through a period of denial and disbelief before they finally begin to see the truth.
When to Be Suspicious of an Investment Sales Pitch
What are some clues that you are about to fall for a dishonest sales scheme? Often, according to an article called "Five Misleading Investment Pitches" in the March, 2015 AARP Bulletin, the sales person will make one of the statements shown below.
* "I can guarantee you a high return," "Other people are already making 25% a year," or "This investment consistently performs better than the market." No one can guarantee you an abnormally high rate of return and anyone who does make such a guarantee is breaking the law.
* "You can trust me because I'm a good, active member of your church (temple, club, etc.)." Unfortunately, con men cheat their friends and acquaintances the most frequently ... and then beg for forgiveness when the truth comes out.
* "This investment is registered with the Securities and Exchange Commission." This should be an immediate red flag because the SEC does not vet investment products.
* "I specialize in putting senior citizens in conservative investments." What this usually means is that they sell costly annuities and similar insurance products at free lunches.
* "I only earn money from commissions." This statement often puts pressure on friends who want to help out by giving their investment business to their favorite friendly sales people. The statement is intended to generate sympathy and is surprisingly effective at getting people to buy low quality investments because they want to be helpful.
DO NOT FALL FOR ANY OF THE ABOVE SALES PLOYS!
Be suspicious of any deal that is not being handled by a reputable company or that is not commonly available to the general public. Get second and third opinions from other companies and compare what they have to offer carefully. Read the fine print thoroughly. Discuss the investment you are considering with other astute investors. Use the internet to see what is being said on the internet about that investment. In other words, do your homework before turning your hard earned money over to someone else.
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