What a terrific title for a book on keeping yourself safe financially. Naturally, the Madoff and the Stanford scandals feature as sobering lessons…
The Five Signs of Financial Fraud are:
Sign #1 Your advisor also has custody of your assets
Sign #2 Quoted returns are consistently great! Almost too good to be true
Sign # 3 Flashy tactics — The investng strategy isn’t understandable — is murky, flashy or “too complicated” for him (her, or it) to describe so you easily understand.
Sign #4 Exclusivity … Your adviser promotes benefits like exclusivity that don’t impact results.
The scam is to try to make you think: “this guy is clearly super-duper long-term successful — which in [the victim’s] mind speak to legitimacy and that [scammer] can be trusted. And he’s a nice guy to boot — he gives to charity!
Sign #5 You didn’t do your own due diligence, but a trusted intermediary did. (Lesson: Due diligence is your job no one else’s!)
From How to Smell a Rat by Ken Fisher and Lara Hoffmans.
And look at this rogues’ gallery compiled by the author — with, in some cases, pictures of rats with the caption ‘(Actual photo unavailable)’. Nice touch!
(Ha! And some of my subjects on this blog complain about their treatment here.)