How not to get burned by an investment scam

Developing a financial and retirement plan and investing your assets wisely are two of the most important things you can do. You work hard for your money, and you should take great care as to how you make that hard-earned money work for you. For that reason, in order to guard against fraud and protect yourself from scams, it is very important that you do your homework before taking action.

Unfortunately, people do not always do what they should to protect themselves, and despite tougher laws and better oversight, investors are continuing to get hurt by bad investment deals. In a survey conducted by the Federal Trade Commission, an estimated 13.5 percent of U.S. consumers (30.2 million people) are defrauded each year, losing close to $3 billion annually. In addition, a survey by the FINRA Foundation of U.S. adults age 40 and over found that more than 80 percent of respondents have been solicited to participate in a potentially fraudulent scheme. What’s worse is that over 40 percent of those surveyed could not identify the “classic” red flags of fraud. As these numbers indicate, there is a good chance that you will be approached by someone soliciting a questionable money making scheme so, it’s best to equip yourself with knowledge of what “red flags” to look for in advance.

Here are some tips to follow that will help you avoid falling victim to an investment scam:

Listen to your gut.

You’ve heard the saying a million times: If something sounds too good to be true, it probably is. Listen to your intuition; if it is telling you that something is wrong, it likely is - so walk away. It’s always better to be safe than sorry.

Look out for “guaranteed” returns.

If you ever hear “guaranteed high returns” be very careful; there are no guarantees when it comes to investing and anyone promising otherwise is not a reputable professional.

Ask questions and do your research.

Getting accurate information is critical when making informed financial decisions. Ask questions and do your research before committing to an investment. Contact the SEC if you have questions about a securities product or the Nevada state insurance department to find out about an insurance policy or company. If you feel the person representing the investment deal is being evasive and won’t provide you all the details - don’t walk, run away from this investment opportunity.

Don’t fall for high-pressure sales techniques.

An investor should be very skeptical when a sales pitch for a “great” investment has time restrictions. You shouldn’t have to “act now” in order to invest in a reputable product. Chances are that the person selling this investment doesn’t want you to do your research. You should never feel pressured to make a quick decision when your money is at stake. Take your time and talk about the opportunity with a reliable third party.

Never pay a person directly for an investment.

One of the biggest red flags in the financial industry is a company or advisor who asks you to make a check payable directly to them. A third party custodian, regardless of who makes your investment decisions, should always hold custody of your money. This creates a barrier between your money and the investment professional.

Before making a financial move, do as much research as possible and don’t ever be afraid to question something and walk away if it doesn’t seem right. Making one big financial mistake could be all it takes to drain your savings of everything you’ve spent a lifetime to build.

This information is for educational purposes and should not be considered specific financial, tax or legal advice. Always consult with a qualified advisor regarding your individual circumstances. Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Adviser.

Brad Zucker, RFC® is the president of Safe Money Advisors, Inc., a Las Vegas-based independent financial advisory firm. He blogs on personal finance every Monday for the RJ. For more information visit www.SafeMoneyAdvisorsNV.com or connect with him via Facebook and LinkedIn.