When dealing with a "too good to be true" investment offer, the advice is always to determine whether or not the individual and the product offered are registered with the regulatory authorities. Investment scams often entice investors with unusually high guaranteed returns. For example, take a real estate investment that offers 12% guaranteed investment returns with the ability to get your money out in one year. That is a classic scam that has red flags written all over it. Who wouldn't want an investment with high guaranteed returns that you could get your money back in just one year?
What if the investment scam artist said that they were registered with the appropriate regulatory agencies? Further, what if they claimed that the investment was registered as well?
To take it further, what if this scam artist were to show you the registration on a regulator's website? What if the scam artist showed you his or her website with all the correct regulatory wording?
The FBI and the SEC recently released a warning to consumers that scam artists are now pretending to be financial advisors who are registered. They are going as far as publishing social media posts and creating imposter websites to appear legit. How in the world as a consumer would you be able to detect that kind of fraud?
Fortunately, there are still a few red flags that are consistent with these scams.
#1- Most investment scams involve high guaranteed returns that are well over the going rate. Currently, the highest guaranteed return that you can receive is on a fixed annuity that pays 3%. Even then, you have to commit your money for at least five years. These investment scams almost always pitch anywhere from 8% to 12% guaranteed returns for short periods. Once again, the "too good to be true" filter is almost always reliable.
#2 - Most investment scams require you to write a check to a company that is not registered with the regulatory authorities. A request to write the check directly to the advisor or the advisor's company is a red flag and warrants caution. A scam artist can easily pretend to be someone that he or she is not. However, it is much tougher to pretend to have a registered product when writing the check for the investment.
When the stock market is booming, these scams are everywhere because people are not paying attention and are more susceptible to their enticing offers. After all, high guaranteed returns are more believable since "everyone is making money – right?" It is important to go into any investment with eyes wide open because scam artists are everywhere working to separate you and your money.
Need a second opinion about money and investment issues? Just ASK BOB! Bob is available and always happy to share his views.
Bob Brooks is a Financial Adviser and host of The Prudent Money Radio Show, aired daily at 3 PM CST on 91.3 FM, 97.5 FM, and 99.9 FM in the Dallas Forth Worth metroplex. Listen online at www,prudentmoney.com. You can reach Bob at 972-386-0384 and online at firstname.lastname@example.org.