From shady snake oil salesmen to the proverbial Nigerian prince, there is no shortage of fraudsters in the world trying to swindle people out of their money. You might think scams only happen to other people. You know better than to fall for phishing scams or multi-layered marketing products that don’t work. But despite best efforts even the most careful, conservative investors can still get tricked.
A retired couple in Ontario Canada sold their home and received $268,000 from the proceeds. They wanted to invest in something short term and gave the entire amount to an investment company, MJF Financial Consultants. The couple was very explicit that they will need this money in the near future and did not want to risk losing any of the principle. The company told them to not worry.
Well unfortunately the money-grubbing clod of a salesman forged the couple’s signature, and gambled their $268,000 in risky stocks. When the couple asked for the money back, the investment firm had lost $80,000 of their money.
“We had trusted him to make the right choices for us.” – Don, the husband.
A government investigation has found the company committed forgery and acted inappropriately, and it should reimburse the $80,000 back to the couple. However, this recommendation is non-binding, meaning the company doesn’t have to if they don’t want to. Welcome to Canada, where punishment for white collar crime is often just a slap on the wrist 😛 Unfortunately the couple may never see their $80,000 ever again 🙁
“I never had any health problems prior to this. I am now on two heart meds, five times a day. I am furious.” – Elaine, the wife.
Being the victim of fraud and misrepresentation is often harder to avoid. There’s no way to tell for certain which mutual fund dealer will decide to fake a client’s signature, or commit embezzlement or other financial crimes.
So my suggestion to protect your money from conniving fraudsters in the financial industry is to become a do-it-yourself investor. It’s the only way to be in complete control of your finances. Thankfully it’s now easier than ever to start investing by yourself. TD customers can start with some e-series funds. People who have accounts with other major banks can walk into their branch and open up a trading account. The best investments to start with are index funds which will simply track the overall markets.
But if you aren’t yet ready to venture alone, then before you invest in anything else with your financial advisor or mutual fund expert, you need to consider the following questions 😉
- Is this fund/investment sustainable?
- How much do you trust the salesman/manager to tell you the truth and do the right thing?
- Are there any conflicts of interest that might sway the representative’s message?
- What is the management expense ratio (MER) and other possible costs associated with the product?
If the expert whom you’re buying the investment from cannot answer any of those questions, or if you’re not satisfied with the answers, then think twice about giving them your money 😐
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Random Useless Fact:
Pakistan has the 6th largest population in the world and is the 2nd largest producer of chickpeas.
This is exactly why I invest upon my own accord. I do not trust anyone else!!
Skipping over the middleman also makes our lives a lot simpler 🙂
Great advise Liquid,
Some mutual fund managers (not all, there are some great people) tell you how they could double your money in 1 year by investing in ‘hot’ stocks, but don’t trust them.
Invest your self in TD eseries or try Questrade, you can buy any ETFs for free. You can start invest with little money.
Cheers
Lots of misinformation out there. If a fund manager offers a guaranteed 15% return then that’s a huge red flag. Another common mistake was made by the retired couple in the story. They paid a one time commission of $2,680 or 1% of their total investment amount, directly to the salesman. Cheques should be made paying to the company’s name, never to an individual. Being asked to compensate a salesperson directly is another bad sign. Thanks for the tip about Questrade. Very low commission and is quite popular among some of my friends. Other discount brokerages also offer certain index fund purchases for free. A simple search on the web can offer comparisons to all of them.
God are people stupid.
Spend a gizillion hours trying to get the best price on a head of lettuce but can’t be bothered to do the same with hundreds of thousands of dollars.
It’s surprising how much people don’t know about themselves. I’m watching a speech by Charlie Munger on Youtube right now :0) He’s talking about the psychology of human misjudgement. One can be capable of so much more once he understands how his mind works.
Good advice… Become a do-it-yourself’r. If you feel you do not have the capacity to be a DIY’r, then research and seek out reliable professional help… and yes, second and third opinions from others you trust on top of solid researched references are highly recommended here. if you have money, guaranteed someone wants a piece of it, and you might as well share it with at least someone who has your best interest at hand to help you reach your goals.. – Cheers.
Everyone wants a piece of money if you have it, especially those poorer than you lol. I typically only ask for advice from folks richer than I am so there is lesser chance for them to be jealous. But yeah, having close people whom you can trust about money is really important.
Yea, I read this article online and felt sorry for the couple. My friend’s sister started to invest in a mutual fund, good for her, but the advisor told her that there’s no “cost” to her for buying the mutual fund. That’s a bunch of bull crap that’s cuz the cost is hidden under multiple layers that she won’t be able to see on paper. At least the mutual fund is TD Income Fund, but there is a MER of 1.58% that will eat up her gains down the road. People who don’t research are gullible to the words from a “trusted” advisor.
Your friend’s sister has one of the most popular funds at TD right now lol. CIBC also tries hard to sell their version of the monthly income fund. It’s easy to market as a balanced approach to income and growth and although the MER is still expensive, it’s cheaper than many of the bank’s other products.
Yes, pretty sad for the couple. Hopefully they will take the company to court and get some kind of settlement at least 🙂 It was very dumb on the salesman’s part to use the couple’s money by investing it in stocks. If he wanted to play with other people’s money he should have at least done it properly. Instead of leveraging all the assets of one couple, he should have taken smaller amounts of money from a larger group of people by just borrowing on an investment loan, which is what I do. If enough people like me decide to not pay back all our loans to the bank, then many depositors and tax payers get hurt, not just one household. This is the legal way to gamble with other people’s money, unlike faking someone’s signature.
Haha. No pressure 🙂
I think another good metric would be relative return on your investments. If the offer is too good to be truth, it is probably no true offer.
Not heeding this warning has led many people into ponzi schemes 🙁 Investors should not allow greed get in the way of common sense 🙂
DIY investing is the way to go…with a small amount of time and effort anyone can get set up with a diversified, low-cost sleep at night portfolio. I feel sorry for that couple…there really should be more stringent regulation and more hefty fines for financial crooks!
I agree. Unfortunately Canada is the only modern country without a national securities regulator to protect retail investors because our Provinces refuse to work together lest it reduces their power, influence, and revenue. So actually being punished for a financial crime is often the exception, not the rule.
I didn’t go through any such problem. In fact, none of my relatives or even friends fell into such trap. At least I haven’t heard any such thing from them. However, after reading the points mentioned in this blog post, I’m hell scared, not for me but for my parents. If something like the example mentioned here happened to them what would have happened to them? I’m surely going to brief my father over phone right away. Thanks for showing me the real world of fraudsters, who especially con the seniors. In fact, this concern led me to research a bit so that I can help my parents. Here’s what I found at Financial Consumer Agency of Canada regarding the ways to safeguard oneself from financial abuse: 1. Keep PIN and passwords with oneself. 2. Don’t give away your banking and other personal financial details to email and phone requests. Also keep those info at a safe place. 3. Decisions involving property and home related matters (including Power of Attorney) don’t forget to take legal advice, especially before signing anything. 4. Joint account should be opened with someone whom you trust. The fallout of divorce should also be kept into… Read more »