Investment frauds are being perpetrated at a wider scale these days. One of the common frauds is the Ponzi scheme in which the investor is paid back from his own money or from the money of new investors, but the schemes soon collapses, wiping out the wealth of later investors. You have to be cautious while investing so that you do not fall into any of these traps. The best way to protect your wealth is to find a trustworthy financial adviser.
Before you go to a financial adviser, you should check the credibility of the person. It is always safer to use an adviser who is affiliated with national organizations such as the Certified Financial Planner Board of Standards, the National Association of Personal Financial Advisors and the Financial Planning Association. You can search databases of these organizations to get information about legitimate financial advisers in your area.
For further checks on the adviser, you can look at his ADV Form, Part II. This will give you all the details about the background of the adviser as well as his fees and services that have been filed with the Securities and Exchange Commission. Find out what kind of reputation the adviser has and how long the person has been doing this work.
You can check if any complaints have been filed against the adviser with the securities regulator of your state. Personally visiting the office of the adviser can also shed light on the true nature of his business.
If the adviser is promoting investments that claim to give extraordinarily high returns, then you should be wary of him and the investment opportunity. When things are too good to be true, they probably are. Another telltale sign is that the adviser does not disclose the actual risk or downplays the risk. These are all signs that can cast strong suspicion on the credibility of the financial adviser.
You should also be careful at the time of making the investment. Never invest in any complicated instrument that you do not fully understand. Avoid nontransparent instruments, as they do not have to disclose their performance and there is a higher risk of fraud in such investments.
Although, people of all ages should be cautious when it comes to investing, senior citizens need to exercise extra caution. People who are close to their retirement, or those who have just retired, are the most common targets of investment frauds.