FINRA article- advice on how investors can avoid being fooled | Cold Spring Advisory Group

FINRA article- advice on how investors can avoid being fooled

April 25, 2016

FINRA offers 5 tips to help investors from being tricked out of their money.

  1. KNOW WHO YOU ARE DEALING WITH.  When choosing a financial advisor, consider  your financial needs and goals.  Ask friends and family for refernces of people they've used.  Once you have a list, interview a selection of candiates.  Ask a lot of questons, like how are they compensated, what fees and expenses they charge and what are their clients like.  Only work with registered firms and individuals and check their employment and regulatory histories.  The best tool for looking into an advisors history and at no charge is  BrokerCheck®.
  2. UNDERSTAND HOW TO WORK WITH YOUR ADVISOR.  Be clear about your investment goals and be honest about the amount of rish you are comfortable taking.  Learn about any investment before you make it.  It's not enough to read the sales material or offering documents.  Make sure you truly understand the investment strategy by asking lots of questions about potential risks and rewards.  Keep a vigilant eye on your account, including fees, account statements and transaction confirmations.  Be wary of sales pitches that make exaggerated claims about performance or predictability.
  3. KNOW THE DIFFERENT TYPES OF INVESTMENTS.  There are various types of investments that can help you achieve your financial goals.  Each has it's own set of features, costs, liquidity, risk factors and purpose.  You should ask questions about all of these elements- and also consider which mix of investments can best help you achieve your financial goals.  Make sure you have at least a general knowledge of bank products, bonds, stocks, investment funds and products for specific purpoises like saving for college or retirement.  Never approve or purchase an investment or sign a contract without fully reading and understanding everything about the product.
  4. LOOK FOR THE WARNING SIGNS OF FRAUD.  Look out for guarantees, unregistered products, overly consistent returns, complex strategies, missing documentation, account discrepancies and pushy salespeople.  The vast majority of investment advisors are trustworhty, but there are still others who will seek to take advantage of your trust.  Practice spotting the persuasion tactics thatcon artists use, and always exercise healthy skepticism.
  5. ASK QUESTIONS.  Always remember this, it's your money, you shouldn't feel uncomfortable about trying to protect it.  Never worry about appearing uninformed and remember, there are no stupid questions: how does this product work, what are the risks, is there a cap on the return, is it a registered product, can I sell it quickly and easily, how is the seller compensated, etc.  If your questions are not answered, or you don't feel comfortable, then your response is clear: tell them "no".