Over the past few years, an increasing number of headlines about people who have lost their life’s savings due to Ponzi schemes have appeared. Unfortunately, this type of personal devastation is not restricted to North America. In fact, it’s a worldwide problem. Luckily, there are things you can do right now to ensure that you don’t also become a victim.
Step 1: Do your research. How well do you know your advisor?
The best way to protect yourself against fraud is to be proactive. If you’re in the market for a new financial advisor, ask your friends and family for a referral. Has the advisor been well trained? Do they have a strong foundation in financial education and certification? Do they work for a reputable company? If they’re independent, would they be recommended by any of their current clients?
It’s important to check their credentials with the Financial Advisors Association of Canada, the local better business bureau or the local regulatory body’s information centre or website.
Remember that an advisor who sells insurance products must be licensed by a provincial oversight agency.
Step 2: Keep a cool head.
When you meet with your potential advisor, make sure you’re not swayed by a person’s title or by their sales pitch. Be particularly wary of anyone who promises high returns or asks you to write a personal cheque to them instead of their firm.
- You should never be asked to keep a secret.
- A representative should never avoid stating who they work for.
- Never feel pressured to invest in "sure things."