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zenPeak > 2008 > December

Is your Financial Advisor a scam artist?

Here’s a list of the top 3 tell-tale signs to watch for to determine if you are being scammed.

  1. I would put this at the top… “Custom Statements” What do you know! All of a sudden the statements you used to get from your investment house,  have been replaced by a customized personal report prepared just for you, by your broker. Call the Head Office compliance department and put your complaints in writing asap.
  2. Your broker asks you to make out a cheque to him or her personally. Cheques made out to your broker’s name not the firm. Forget the lame excuse, this is a red flag. Take action in writing and call the Head Office compliance department.
  3. You see strange trades in your account and your broker reassures you it will be taken care of.  Allow a day to fix the problem just in case it was a legitimate error.  If it isn’t fixed, you know the drill…

More from CNBC:

Also, watch for strange behaviors such as your advisor is never in the office, asks you to call them on their cell phone instead of the office line which is likely recorded, your broker fails to follow your trade instructions, or you suspect they may have an addiction problem (alcohol, drugs, gambling). All of these should make you suspicious.

Frank Abrams is the founder of zenPeak Inc. – insuring peak performance

Diamond Handcuffs for alleged Wall St. Scammer

It’s sad to see the pictures of all the happy faces at the Madoff & Co.  Christmas party on the company website. Why? The legit trade execution firm is now tainted with the shadowy dealings of founder, and former Nasdaq chairman Bernard Madoff, who ran a separate hedge fund that has imploded in what he allegedly described himself as a “a giant Ponzi scheme”.

As a commodity broker myself in days past, I can tell you I never met a fellow broker or trader who liked the term “hedge fund”. Originally the thinking was to create funds to balance other asset classes held by rich folks, hence the term, but the reality is they are speculation funds. And in this case speculation, greed and perhaps fraud have made the front pages, but at the bottom of the page. This news is overshadowed today by the auto bailout bill not being passed by the US Senate, but it is very very big news for Wall St. since the Madoff funds investors were the smart guys of Wall St. and total losses may be from 17 $billion up to 50 $billion.

Supposedly turned in to the authorities by his sons, if it is true this would be the largest ponzi scheme in history, and like all of them the unraveling starts when people demand their money back, and fresh funds coming in are not available to service the prior “investors”. Hedge fund redemptions, forced selling and trading losses don’t help matters.

Bloomberg reports that “Jim Voss who runs due diligence firm Aksia LLC, said he spent several months probing Madoff’s firm on behalf of clients, only to recommend against investing in it.

Among the red flags, Vos said: Madoff’s auditor, Friehling & Horowitz, operated from a 13-by-18-foot office in Rockland County, New York. Vos had an investigator stake out the office. A call to the New City, New York, office of Friehling & Horowitz after business hours wasn’t returned.

“I’m shocked by how investors turned a blind eye to returns that were too good to be true, constant steady small positive monthly returns,” Vos said. “When something is too good to be true, it probably is.”

- for information on insuring peak performance in high-risk and high-trust roles please contact me.