In her article, How to Tell If Your Financial Advisor Is a Scam Artist, Carmen Wong Ulrich refers to what type of fund?

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Question: In her article, How to Tell If Your Financial Advisor Is a Scam Artist, Carmen Wong Ulrich refers to what type of fund?

Answer: health care

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How to Tell If Your Financial Advisor Is a Scam Artist
Posted By: Carmen Wong Ulrich

Quite a few of us are watching the Madoff madness and thinking: “There but for the grace of God go I.” While our second thought is: Hey, who is this gal or guy that’s managing my money, really? The beast that is this market has already made off with a third of our money (and then some), how can I make sure my financial advisor and/or broker isn’t an alleged crook like Bernie?

First off, if you already employ an advisor who is the employee of a financial institution or brokerage, there are systems put into place to protect you from ‘rogue’ behavior. A bank or brokerage has insurance as well as a team of lawyers to work to get your money back, should you be able to prove foul play. And remember, when a broker like Lehman goes under, your funds are covered by SIPC. However, if you invest with an individual and his or her company, such as in Madoff’s case, there may be much less in the way of protection.

Here’s how you can sniff out someone shady:

First, even though referrals are usually great for contractors and tax preparers, know that the best crooks have credentials—so a rave review and some initials after his or her name don’t cut it. Check out his background with the National Ethics Bureau at EthicsCheck.com and with the SEC. But the best line of defense is your own knowledge about where your money is invested. Don’t just look at your statements. Know the products you own and their record of behavior. For example, if your ‘guy’ is saying he can get fantastic returns on this ‘new’ health care fund, do your research on health care funds. If he’s saying he can get you 15% returns but history and projections reveal behavior closer to 5%, you’ve got yourself a shady one. And if, like Madoff, your advisor or broker acts defensive when you ask questions or threatens you gently (or harshly) for questioning their tactics, make like a savvy dater and head for the door.

There’s nothing wrong with choosing to employ someone to manage and aid our investment choices (remember, you’re the boss!), but we should act as a well-informed patient—after all, the quality of our lives is on the line.

PROGRAMMING NOTE: Carmen discusses the post-Madoff fear of investing with two victims of the Madoff heist - On The Money Monday at 10p ET


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