Avoiding Deceptive Investment Schemes by Financial Advisors

In the world of finance, finding the right advisor can be crucial for a secure and prosperous investment journey. Here are some tips to help you make informed decisions and avoid potential pitfalls.

Ken Mahoney, CEO of Mahoney Asset Management, advises investors to consider finding a new fund within the same fund family to avoid unnecessary fees. This strategy can help you save money and ensure that your investments are managed efficiently.

However, when it comes to Mahoney's previous roles, there is no publicly available information about the company or person he led as CEO before Mahoney Asset Management.

When it comes to your advisor's behaviour, it's important to be vigilant. If they are buying and selling different mutual funds frequently, their actions should be questioned. High-pressure sales techniques may also indicate that the advisor is not reliable or trustworthy.

Phony investment credentials are a potential issue in the financial advisory industry. To ensure you're working with a reputable advisor, look for those who are registered investment advisors (RIAs) who act as fiduciaries. Well-respected credentials in the financial industry include the certified financial planner (CFP) and chartered financial analyst (CFA) designations.

Be skeptical of anyone asking for your financial information, and never give your password for financial accounts to anyone. Writing checks directly to a financial advisor or their firm is also a red flag, as the money should be held by a third-party custodian.

Unfortunately, there are instances of fraudulent activities in the financial world. For example, Bernie Madoff orchestrated the biggest Ponzi scheme in history, worth $65 billion, in the 2000s. Ponzi schemes involve current investors being paid with money from new investors.

Churning, another fraudulent practice, involves a financial advisor buying and selling securities frequently to earn commissions. This practice is less common with online brokers but could still occur with mutual funds. Be wary of pump-and-dump scams, which involve inflating the price of penny stocks through misleading information or market manipulation.

If you suspect a financial advisor or firm is acting fraudulently or not in your best interests, you can check with their compliance department, alert the SEC or FINRA, and move your money out of the firm as soon as possible. Trust your gut; if something seems off with your advisor, it's best to find a different one.

Lastly, remember that there is no such thing as a guaranteed return in investments. A good financial advisor is patient and takes the time to explain investments and overall financial strategies to clients, helping you make informed decisions about your financial future.

By following these tips, you can navigate the financial world with confidence and make informed decisions about your investments.