If It Sounds Too Good to Be True…

August 05, 2016

The Consumer Federation of America (CFA) and the North American Consumer Protection Investigators released a study based on complaints to local consumer organizations. This article discusses the top 10 categories of complaints. At number 10 is “Scams.” To quote the article, here are some of the top scams:

  • Tech support: A caller claiming to be with a well-known company such as Microsoft seeks access to your computer, warning you will lose files or suffer other harm if you don’t allow it.
  • The grandparent scam: A “grandchild” calls an older person, claiming to need quick cash for an emergency in another state or country.
  • CEO email: An email that appears to be from your company CEO asks employees to wire money to a foreign supplier for a deal that needs to close immediately — promising you’ll be reimbursed, of course.
  • IRS scam: A caller “from the IRS” wants money you owe, now, often in the form of a prepaid card (iTunes gift cards are also being used this way). The caller may warn that you’ll have to pay even more or that law enforcement officers will come to your home if you don’t comply.
  • Tax ID theft: In this case, the scammer poses as you and scoops up your tax refund. In many cases, taxpayers don’t find out about it until they can’t file their tax returns because someone beat them to it.

The common thread in these scams is that the scammer preys upon one of two emotions – fear or greed. By either promising something for free or using fear and pressure, the scammer hopes to use your emotions against you and in his favor. I’ve talked to quite a number of people who have fallen victim to a scam and have seen the financial distress that it caused.

For example, one of my friends has been out searching for a new job recently, and he was telling me about an offer he received from a company. They were offering a much higher salary than other companies he had interviewed with recently and definitely made him feel special throughout the interview process. It was almost as if they were telling him exactly what he wanted to hear. They offered him a role, and he was strongly considering accepting it, but there was a nagging little voice in his head that said something didn’t add up. He was contacted by a recruiter and hadn’t known much about this firm other than what they told him.

So we broke out the laptop and started doing some research. What we found was not spectacular. The leaders of the organization had a very checkered past, and while they treated their employees well, their customers were overcharged and charged for services never performed (at least in prior companies). He politely declined their offer, but he nearly accepted it because they used his emotions against him. It was the same modus operandi of the scams but with a different end goal.

If confronted with a situation like these scams, don’t ever give personal identifying information to anyone over the phone. Take a deep breath and a mental step backwards. Break out Google and do some research. Call your local consumer protection agency to see if others have reported scams.

As you go through your life and engage in potential transactions either as a consumer or a potential employee, remember to try to strip emotions from the deal (if it’s significant) and don’t allow anyone to manipulate your emotions against you. No one will be or should be as protective over your money as you. And remember the old phrase, “if it sounds too good to be true, it probably is.”

 

 

 

Who Would You Trust With Your Money?

July 20, 2016

Would you hand a loaded weapon to someone you just met? No matter where you side on the gun debate, probably 99.99% of people would emphatically say “no!” Yet we are often asked to sign a power of attorney (POA), a document giving the power to make financial decisions on your behalf to people that you just met, and probably a lot more than 0.01% of us say, “yes” to that. Perhaps sometimes we should think twice about this.

I’m not saying that powers of attorney are a bad thing. It just means that financially speaking, they are like a loaded weapon. In the hands of someone with lots of training and experience and who you trust, they can be a lifesaver, but in the wrong hands, they can have disastrous results. So how can you make sure that you handle your POA properly?

First, decide if this is going to be a permanent agreement or conditional on certain things happening. A permanent POA is called a durable power of attorney and lasts until you revoke it. My wife of 23 years has my durable financial power of attorney because I trust her completely, and I travel a lot so I could be gone when an important document needs to be signed. That said, in today’s world of e-signatures, the “travel a lot” reason becomes less and less compelling. Because this kind of POA is the most powerful, it should also be used with the most caution.

A POA that kicks in based on certain conditions is called a springing power of attorney. This is often used in case you are ill or injured and unable to make decisions for yourself. A springing POA gives someone the ability to make those decisions instead of the probate court so it is a very important thing to have. Just remember that even though this POA is far less likely to be used, it still has the same power if it kicks in, so be sure to choose your POA wisely.

In terms of how to choose someone, it comes down to competence and confidence. Does this person have the education and experience to do the job AND do I trust them to look out for my interests and no one else’s, especially their own? You may choose your spouse or a close/trusted friend or family member, although these choices may change as you age. Just make sure that you let them know who your experts are – financial advisor, CPA, attorney – and vice versa. This way, they at least know where you prefer to get your expertise.

In some cases, you may need to give those experts a POA. This could be the case when it comes to a CPA who has to defend you from an IRS audit. That makes sense.

Again, just make sure that you have vetted this person. To properly vet them, you should probably interview 3 possible candidates for the job to see if your gut says that you trust them, but more importantly, you should check with the organization that gives them their credentials and with regulatory agencies to look for complaints before you give them a POA. If you have access to a service that does background checks, that would be ideal.

Financial advisors often get a limited POA to make investment decisions on your behalf if they manage your assets. This can be a good thing if it allows them to sell a stock about to tank while you are on a beach vacation, but make sure that it is very limited. Have an attorney review any limited POA or agreement giving an investment advisor “discretion” over your account.

Most of the time these are straightforward. You hired them to make the decisions on the investment choices within your risk tolerance, and this lets them do that. Beware, however, of an investing POA that allows them to invest in things like limited partnerships, LLCs, closely held companies, or basically anything that isn’t publicly traded. That is a big red flag and has often led to fraud.

Now you’ve had your “course in POA safety.” You should be ready to confidently appoint the right person to take your financial life in their hands. Who will you choose?

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Don’t Be a Financial Horror Victim

June 14, 2016

I love old B-rated horror movies. In fact, I was watching the Halloween countdown of horror movies at a Halloween party, and every male under 20 was impressed by the fact that I knew almost every horror movie by watching one scene. I am sure some of this comes from my male relatives  taking me to an R-rated horror movie (sorry mom) when they were forced to babysit me. I felt so grown up watching the movies, and I was surprisingly so fascinated as to how they created the scenes that I never got frightened.

What struck me about every movie is that moment when you almost root for the bad guy. You know the scenes when the next character to die goes into the scary building and then runs upstairs as if he or she will grow wings and fly? They always had a bad feeling and always ignore the outward signs. As I recently watched a horror movie with my husband, I was struck by the similarity between people in horror movies ignoring all of the bad signs and how people ignore the “writing on the wall” about a bogus advisor.

During 2008-2011, the main demographic of the group where my office was located was snowbirds – retirees who spent their winters in Florida and their summers in Georgia. One client at the time asked me to talk to her sister. She said something did not sound right about her sister’s investments. After taking a quick look at her statement, I recognized the name of the investment company, and I unfortunately had to tell her that she was a victim of a Ponzi Scheme. News traveled quickly, and I soon found myself flooded with retirees.

I could feel the panic of most of the retirees I spoke to. Most sensed something was wrong. After I got to know many of them, I asked them what they would have told themselves ten years ago, knowing what they know now. Overwhelming what I heard was:

1. If it is too good to be true, then it is.  Many of them knew markets goes up and down and anyone that promises nothing but an upside automatically should raise a red flag. No investment is 100% perfect.   As you can see from this chart  that markets have highs and lows. If you are promised returns that do not match this chart’s returns question your financial planner as to why their results differ from historic average. Remember, a good planner will go over the benefits as well as the risks with their recommendations and work with you to make the most informed decision.

2. If you do not understand the investment and/or investment philosophy,  ask until you do. Over and over again, I heard that the reason why they thought they did not understand their investments was because they weren’t knowledgeable enough. You should always understand the investments and/or investment strategy and how those choices will get you closer to your goal. If you struggle to understand this, keep asking until you do, even if it means finding an advisor that can help you understand. If you struggle to understand financial lingo, consider using websites like Investopedia University or Morningstar’s Investing Classroom to help you translate financial jargon into something understandable.

3. No matter how much you trust your advisor, do a background check. Not one person I spoke to did a background check. All believed everything they were told. In some cases, the background check would have revealed past problems with clients. No matter how trustworthy you think your advisor is, check their records at FINRA BrokerCheck.

You can also use this article as a checklist to finding the right financial advisor for you. Whatever you do, don’t be like a horror movie victim. Noticing bad signs and doing a little homework can go a long way to preventing you from being the victim of a bad financial planner.

 

Multi-level Marketing or Pyramid Scheme?

January 25, 2016

I’ve been hearing more and more from friends that they are considering a side gig selling a product or service. We all know stories of people who have made substantial extra income from things like nutritional cleansing, personal care products, cosmetics, financial products and vitamins. Many of these are established companies and household names. Consumers like their products and the feeling that comes with supporting their friends and neighbors. Continue reading “Multi-level Marketing or Pyramid Scheme?”

The Other Side of American Greed

January 18, 2016

Friday nights on CNBC, households all over the country are watching American Greed, the wildly popular documentary series narrated by Stacy Keach which tells the real-life stories of financial crimes and the effect on their victims. There have been episodes about Ponzi schemes, mortgage fraud, identity theft, insurance fraud and investment scams. Some of them tell truly heartbreaking stories, where the people who were victimized by the fraud seemed to be making wise decisions, only to be fooled by someone with criminal intent. In all the episodes, the message is clear:  there are hucksters and criminals who are out to steal your money — and you’d better be on guard. It’s an important message, one that we all need to hear. Continue reading “The Other Side of American Greed”

When Winning The Lottery Isn’t Really Winning

September 04, 2015

I heard about a story from a friend and I didn’t believe it.So I went to a more reliable source than my friend’s text message, and I found this article about Illinois lottery winners receiving IOU’s rather than money. The lottery agency is a state run entity and the state has not passed a budget so winners of $25,000 or more are not getting paid right now.   Continue reading “When Winning The Lottery Isn’t Really Winning”

3 Tips To Protect Yourself When A “Creditor” Calls

August 05, 2015

A few months ago, my wife received a call from someone claiming that we owed money from an unpaid medical bill. If you know anything about my wife, the idea that we owe anyone anything is troubling. Considering how many doctor bills, hospital bills, dental bills, and who-knows-what bills cross our table every year, it would not be inconceivable for us to have missed a payment. Fearing that perhaps one bill did go unpaid and the  possible threats of legal action and bad credit, my wife gave the caller our credit card information to satisfy the bill. Continue reading “3 Tips To Protect Yourself When A “Creditor” Calls”

DIY Credit Repair

July 07, 2015

One of my cousins came to see me excited over a meeting she recently had. If you know my cousin, she gets excited over air so I always have to proceed with caution every time she has wide eyes and a high pitched voice and looks like she is about to do a cartwheel. She was excited because she had just met with a credit repair company that promised that they can get all of her negative credit taken off her credit report and can get her score high enough so she could buy a home. Continue reading “DIY Credit Repair”

The Price of Inattenton

January 02, 2015

As we look back at the previous year, I have started thinking about people I’ve talked to this year who have left an impression on me. One of the more memorable people that I was able to have conversations with started with a story that was disturbing on a few levels, but has come to a relatively happy conclusion. The fun part for me was getting updates on her progress and seeing the change in her voice, posture and energy level as things got better.  Continue reading “The Price of Inattenton”

Don’t Put All Your Eggs in One Case

January 09, 2014

I recently saw someone with a cell phone case that doubled as a sort of wallet. It had an opening to keep cards and cash so everything you need is in one place. At first, that seemed pretty neat. Who wouldn’t want to simplify their life?

Continue reading “Don’t Put All Your Eggs in One Case”

Scam Alert: Your Loved One Has NOT Been Kidnapped

December 17, 2013

I’ve previously written warnings about the grandparent’s scam, where a caller pretends to be a grandkid asking for help in a bad situation, typically a fake car accident or drug arrest, and the grandparent is instructed to wire money to help out.  However, scammers are now turning up the heat with the newest twist – the kidnap call. Imagine you are at work, your cellphone rings, and the caller informs you that your father (or brother/husband/son) was in a car accident, declined to give his insurance information, a fight broke out, and your loved one was now being held at gunpoint and you need to wire $1,000 immediately for the damages or else he would be shot.  How would you react?  Continue reading “Scam Alert: Your Loved One Has NOT Been Kidnapped”

How to Dispute a Credit Card Purchase

December 04, 2013

Have you ever paid for a service with a credit card and just weren’t satisfied? Or bought something and found yourself unable to return it because of some obscure policy? If your answer to either of these questions is “yes,” take solace in the fact that you’ve got some recourse. As long as you made your purchase with a credit card that provides a dispute process – which almost all do – you may have a way to get your money back. However, there’s a right way and a wrong way to engage this process. To learn more about how to properly dispute your credit card purchases, read on. Continue reading “How to Dispute a Credit Card Purchase”

Hi, This Is John…

July 02, 2013

My phone rang last Friday night just as I was heading out for the evening.  “Hi, this is John.  I’m calling to confirm a delivery.” I started to talk to John since his recorded voice had me fooled. John went on to say that my medical alert device was waiting to be shipped and to press 1 to verify my address.  Since I hadn’t ordered any type of medical equipment, I quickly hung up.  Continue reading “Hi, This Is John…”

A Phishing Trip No One Wants to Take

March 20, 2013

I received a rather interesting email from my mom this weekend. There were no words, just a hyperlink to a website promoting a weight-loss supplement called Raspberry Ultra Drops.  Either my mom was trying to tell me something or her email had been compromised–again.  Since there were no words in the email, which is very odd for her, and the hyperlink consisted of random nonsensical characters, I suspected the latter.  As you can see from this fraud alert, http://www.onlinethreatalerts.com/article/2013/1/9/raspberry-ultra-drops-to-help-your-weight-drop-spam-email-and-fake-websites/, I was right. Continue reading “A Phishing Trip No One Wants to Take”