How to Avoid Financial Planning Scams

The easiest way to avoid financial scams is to be aware. As the old adage goes, if it sounds too good to be true, it probably is. As a consumer, there are many things you can do to protect yourself when it comes to your finances and investments and many ways to identify a scam.

Instructions

Difficulty: Moderately Easy

Avoid Financial Planning Scams

1. Avoid signing up for any financial offers received from a stranger. This includes calls from investment professionals over the phone or visits from those who do door-to-door sales. If you receive an offer you find appealing, ask the representative to leave the company's details with you so you can check out their legality and get back to her later on.
2. Consult with the North American Securities Administrators Association (NASAA) to find out if a company is registered to provide financial advice (see Resources below). Most companies that offer professional investment advice are registered with a national board, so you should be able to check their backgrounds, records and past complaints if any.
3. Don't give up control. You want a financial adviser to help you make informed decisions, not to take over your money and put it where he deems appropriate. Rather than giving up complete control just because you have no knowledge about investments, educate yourself so you can have a say on where your money goes.
4. Ask a lot of questions. An honest financial planning company will understand your reservations and be willing to take the time to appease your doubts and fears. Make sure you get direct answers and not simple affirmations that things will be fine and that you shouldn't worry. Ask for numbers, examples and specific details and don't settle for anything less.
5. Go with a well-known company if you are unsure of what somebody is offering you. Planning financially for your future is a serious decision, but not one that should keep you up at night. If you find yourself stressing over a particular deal, choose a different company that you know has a good track record.

Tips & Warnings

• Financial planning scams prey especially on the elderly. If you are retired or close to it, be particularly careful when receiving phone calls from unknown solicitors offering seemingly perfect deals.
• Be cautious of people who are too nice or who prey on your fears or needs. A professional should concentrate on talking exclusively about finances and not ask personal questions about your age, your family or your private life in general.