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Revised - How to Detect Fraud - 2 Ways to Tell

A recent fraud case involving a local, well-established North Texas Advisor and Radio Show host made me double think my advice on identifying investment fraud. Typically the fraud has a stated guaranteed return on investment of 9% to 12%. It is such a high rate that automatically red flags should fly. This fraud was 5% to 8% guaranteed returns. With the best guaranteed rate going today that you can get of 4% and with some fixed indexed annuities guaranteeing INCOME RIDERS close to 8%, that could pass the "too good to be true" test and be overlooked. Oftentimes, income riders are confused with account values when it comes to fixed indexed annuities.


Typically, frauds invest into investments that are not everyday consumer based investments such as a business, real estate, oil, bitcoin, etc. This claimed to be mutual funds, stocks, annuities, etc. That flies under the radar.


However, there are two characteristics consistent with just about every fraud that I have read about. One is writing a check to a company that the advisor can access and two is the investment and/or the advisor is unregistered.


Writing a check

There are legit investments were you write checks to investment companies. The hallmark of every scam is the ability for the scam artist to get control of investor money. Thus, you have to make out the check to a bank account under their control. This was the case with this scam.


Registered Advisors and investments

If you are going to offer investments to the public, you have to be registered unless you meet certain circumstances. If you are offering investments, those investments have to be registered. Every scam that I have come across involved some type of unregistered advisor or investment. This was also the case with this scam. This individual hasn't been registered for years.  


Just be careful and make sure - scams are happening all of the time. Do your homework.