Liam Gibson
Wealth of Geeks
Wealth of Geeks
Since November, the Financial Industry Regulatory Authority (FINRA) reports nearly a dozen investor complaints about fraudulent “investment groups” promoted through social media channels. That number may seem small, but the government-authorized not-for-profit organization that oversees United States broker-dealers says this is just the tip of the iceberg.
The industry watchdog warns consumers to beware of scam artists posing as financial professionals on popular social media platforms, including Instagram.
In this type of scam, fraudsters pose as legitimate investment firms to swindle money. These scammers typically use sophisticated tactics, such as creating fake websites and using professional-looking documents, to lure in victims with promises of outsized investment returns.
Remember — if it sounds too good to be true, it probably is. Before sending money to anyone identifying as a legitimate financial professional, it’s essential to verify their credentials. Be cautious of unsolicited offers, and thoroughly research before making any financial commitments.
Thankfully, consumers can turn to official databases and reputable resources online to find financial advisors who are required to act in their client’s best interests. Here, industry insiders share their how-to guide for screening advisors.
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Personal referrals and online reviews
Word-of-mouth referrals represent the most ancient form of marketing, often recognized as the most trustworthy way for consumers to feel confident when evaluating service providers, including financial professionals.
More recently, the proliferation of online review platforms has digitized personal referrals to extend their reach to anyone with an internet connection.
When seeking a potential advisor, experts encourage consumers to rely on their social circle for recommendations, then verify their credentials and read their online reviews. Strong endorsements of advisors from friends and family can be worth their weight in gold.
“Start by asking for referrals,” says Yohance Harrison, CEO and financial advisor at Money Script Wealth. “Ask them — how long have you worked with the advisor? What type of strategies does the advisor specialize in? Did you check the advisor’s background before starting the relationship?”
“Next, you should research the advisor on your own. Start with a simple Google search,” he adds. Harrison suggests one of the top links for advisors should be their profile page on BrokerCheck, a free tool operated by FINRA for consumers to research the background and experience of financial brokers, advisers, and firms. “Check the page for complaints and disclosures. If you find marks on their record, address them with the advisor,” he adds.
In addition to these steps, Certified Financial Planner and Partner at Fiduciary Financial Group Trevor Scotto urges consumers to first check an advisor’s registration with the Securities and Exchange Commission’s Investment Adviser Public Disclosure website and review the disclosures section for any dings on their record.
Scotto also encourages checking the Certified Financial Planner Board of Standards website for consumers, Let’s Make a Plan, to determine if the advisor has earned their Certified Financial Planner (CFP) designation. With an obligation to uphold a fiduciary standard, hiring a CFP could offer an added degree of comfort, often at the same price charged by advisors who haven’t earned the credential.
After verifying an advisor’s licensure and validating their credentials, consumers can also look for financial advisor reviews to make a more informed and educated hiring decision based on the experiences shared by the advisor’s current and past clients.
—————
Stay alert
Once consumers do their due diligence, it should be safe to engage. Still, looking out for anything that seems fishy regarding paperwork and payments remains vital.
“Stay vigilant about documentation from unfamiliar custodians. Ensure all paperwork aligns with the known entities and practices of your advisor,” says Scotto. Be wary of requests for wire transfers to specific bank accounts, as this is a common tactic used by fraudsters.
To avoid falling for a fraudster, aim high and pick the winners in the field.
“Look for advisors who have received accolades or recognition within the industry,” says John Henry, Ph.D. and CEO of Story Makers Investment Advisors. “Awards can be indicative of their expertise and commitment to clients.”
“Advisors who contribute to thought leadership through articles, seminars, or educational content demonstrate their commitment to staying informed and helping clients make informed decisions,” Henry adds.
—————
Setting expectations
It’s important to set the right expectations. Advisors aren’t financial wizards. Clients should expect professionalism, diligence, and sound advice, but experts cannot guarantee profits. Markets fluctuate, and risks persist.
“A reputable advisor does not mean that all of the investments made will be profitable,” says Harrison. “For clients who lose money, it is important not to mistake a loss due to market conditions with intentional fraud by an advisor. Let them inform you of the possibilities for downsides.”
“It is wise to discuss risks associated,” adds Harrison. “Ask an advisor: What is the worst thing that could happen to this investment? … ask the advisor to tell you about a time when things did not work out.”
There is little rest for customers in what one financial expert calls the new “ Golden Age of Fraud.” Ensuring economic security requires diligence in selecting reputable advisors.
The risks seem daunting, but individuals can safeguard their interests by staying vigilant and scrutinizing qualifications, experience, and ethical standards.
The industry watchdog warns consumers to beware of scam artists posing as financial professionals on popular social media platforms, including Instagram.
In this type of scam, fraudsters pose as legitimate investment firms to swindle money. These scammers typically use sophisticated tactics, such as creating fake websites and using professional-looking documents, to lure in victims with promises of outsized investment returns.
Remember — if it sounds too good to be true, it probably is. Before sending money to anyone identifying as a legitimate financial professional, it’s essential to verify their credentials. Be cautious of unsolicited offers, and thoroughly research before making any financial commitments.
Thankfully, consumers can turn to official databases and reputable resources online to find financial advisors who are required to act in their client’s best interests. Here, industry insiders share their how-to guide for screening advisors.
—————
Personal referrals and online reviews
Word-of-mouth referrals represent the most ancient form of marketing, often recognized as the most trustworthy way for consumers to feel confident when evaluating service providers, including financial professionals.
More recently, the proliferation of online review platforms has digitized personal referrals to extend their reach to anyone with an internet connection.
When seeking a potential advisor, experts encourage consumers to rely on their social circle for recommendations, then verify their credentials and read their online reviews. Strong endorsements of advisors from friends and family can be worth their weight in gold.
“Start by asking for referrals,” says Yohance Harrison, CEO and financial advisor at Money Script Wealth. “Ask them — how long have you worked with the advisor? What type of strategies does the advisor specialize in? Did you check the advisor’s background before starting the relationship?”
“Next, you should research the advisor on your own. Start with a simple Google search,” he adds. Harrison suggests one of the top links for advisors should be their profile page on BrokerCheck, a free tool operated by FINRA for consumers to research the background and experience of financial brokers, advisers, and firms. “Check the page for complaints and disclosures. If you find marks on their record, address them with the advisor,” he adds.
In addition to these steps, Certified Financial Planner and Partner at Fiduciary Financial Group Trevor Scotto urges consumers to first check an advisor’s registration with the Securities and Exchange Commission’s Investment Adviser Public Disclosure website and review the disclosures section for any dings on their record.
Scotto also encourages checking the Certified Financial Planner Board of Standards website for consumers, Let’s Make a Plan, to determine if the advisor has earned their Certified Financial Planner (CFP) designation. With an obligation to uphold a fiduciary standard, hiring a CFP could offer an added degree of comfort, often at the same price charged by advisors who haven’t earned the credential.
After verifying an advisor’s licensure and validating their credentials, consumers can also look for financial advisor reviews to make a more informed and educated hiring decision based on the experiences shared by the advisor’s current and past clients.
—————
Stay alert
Once consumers do their due diligence, it should be safe to engage. Still, looking out for anything that seems fishy regarding paperwork and payments remains vital.
“Stay vigilant about documentation from unfamiliar custodians. Ensure all paperwork aligns with the known entities and practices of your advisor,” says Scotto. Be wary of requests for wire transfers to specific bank accounts, as this is a common tactic used by fraudsters.
To avoid falling for a fraudster, aim high and pick the winners in the field.
“Look for advisors who have received accolades or recognition within the industry,” says John Henry, Ph.D. and CEO of Story Makers Investment Advisors. “Awards can be indicative of their expertise and commitment to clients.”
“Advisors who contribute to thought leadership through articles, seminars, or educational content demonstrate their commitment to staying informed and helping clients make informed decisions,” Henry adds.
—————
Setting expectations
It’s important to set the right expectations. Advisors aren’t financial wizards. Clients should expect professionalism, diligence, and sound advice, but experts cannot guarantee profits. Markets fluctuate, and risks persist.
“A reputable advisor does not mean that all of the investments made will be profitable,” says Harrison. “For clients who lose money, it is important not to mistake a loss due to market conditions with intentional fraud by an advisor. Let them inform you of the possibilities for downsides.”
“It is wise to discuss risks associated,” adds Harrison. “Ask an advisor: What is the worst thing that could happen to this investment? … ask the advisor to tell you about a time when things did not work out.”
There is little rest for customers in what one financial expert calls the new “ Golden Age of Fraud.” Ensuring economic security requires diligence in selecting reputable advisors.
The risks seem daunting, but individuals can safeguard their interests by staying vigilant and scrutinizing qualifications, experience, and ethical standards.
