How to Research Who Handles Your Money


The dross continues to rise to the top with the exposure of Marc Drier and Bernard Madoff, money men who may have scammed more than $50 billion combined.

Should you be worried about your money and fraud?

“Anyone, regardless of income, education, or profession, can become a victim,” says Fred Joseph, North American Securities Administrators Association (NASAA) president and Colorado Securities Commissioner, in a recent statement. “The risk of fraud is magnified as investors seek higher returns in today's troubled markets.

"While the vast majority of investment services providers are honest professionals, the potential for fraud should concern us all,” Joseph says. So what can you do?


Investor protection experts at NASAA say there are ways to avoid becoming a victim. Conducting research is a good first step.

Potential investors can contact state securities regulators to verify the legitimacy of investments offered or contact the Better Business Bureau to check on complaints against investment promoters and principals. Other places where you can learn more about the people pitching you investments include the Financial Industry Regulatory Authority's Brokercheck and the Securities and Exchange Commission's Investment Advisor's Public Disclosure service.

Investors should recognize and defend against the undue influence of persuasion tactics, says John Gannon, senior vice president of FINRA. Influencers can include peer pressure: If everyone in your community (or country club) seems to be profiting, do your own research instead of going with the crowd. Other persuasion tactics can involve guaranteeing returns on investments, such as in Madoff’s case. From year to year, he consistently delivered positive returns--a red flag, Gannon says.

Experts also recommend that you maintain a relationship with the person managing your money. Don’t take anything at face value, ask questions and ask for written information on investment products. Insist on a full explanation of investment recommendations and don't invest in something you don't understand. Keep notes about conversations and meetings.

Many investors have a sense of invulnerability, and think that losing money happens to someone else and not to them, says FINRA's Gannon. Because of embarrassment, many do not report that they have been scammed. (And still plenty do: In the past three years there have been 8,365 investor-related enforcement actions, $178 million assessed in penalties, $1.8 billion ordered returned to investors and incarcerations totaling just more than 2,764 years, according to NASAA data.)

“I encourage people to do their homework," says Gannon. "And regardless of who is handling your investment, always be looking over that person’s shoulder and checking on them.”

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