Protect yourself from investment scams
Before investing earnings, it is important to check for scams and verify the credibility of the investment firms being considered to handle a portfolio. Asking questions, researching companies, reaching out to local investment firms and advisors, and talking to other investors are all good ideas.
The Better Business Bureau (BBB) of Minnesota and North Dakota and Financial Regulatory Authority (FINRA) remind people that it's essential to take precautions when it comes to all investment opportunities.
Studies show that investment scams have been on the rise over the past decade. Baby boomers in particular are more vulnerable to such schemes, as many are now managing their own retirement accounts.
In 2010, state securities regulators initiated more than 1,200 enforcement actions, including criminal complaints and cease-and-desist orders, involving investors ages 50 or older, according to the North American Securities Administrators Association. That was more than double the 506 cases in 2009.
FINRA Investor Education Foundation, specializing in investment fraud, has a plethora of valuable information to help people sort through their next investment decision making. It offers three key strategies to use if people aren't certain about a specific investment opportunity:
End the conversation. Practice saying no. Simply tell the person, "I'm sorry. I'm not interested. Thank you." Or tell anyone who pressures you, "I never make investing decisions without first consulting my __. I will contact you if I am still interested."
Fill in the blank with whomever you choose - your spouse, child, investment professional, attorney or accountant. Knowing your exit strategy in advance makes it easier to leave the conversation, even if the pressure starts rising.
Turn the tables and ask questions. A legitimate investment professional must be properly licensed, and his or her firm must be registered with FINRA, the Securities and Exchange Commission (SEC) or a state securities regulator, depending on the type of business the firm conducts.
Talk to someone first. Be extremely skeptical if the person promoting the deals says, "Don't tell anyone else about this special deal." A legitimate investment professional won't ask you to keep secrets.
Exercising these three key strategies will help protect people from fraudsters. Remember, the more knowledgeable people are when making investments, the less likely they are to become a victim. When making an investment, there's no need to rush. Take some time and make an informed decision.