Questions from Investors — Investment Fraud

Q: How can you tell if your financial planner is stealing from your IRA account?

A: Wow, that’s a huge question.

First of all, as a former V.P. at Morgan Stanley, I know that it would be incredibly difficult to do such a thing at a big-name compamy. I did know one man who was prosecuted for stealing clients’ money, but he literally had little old ladies signing over the money to him. So my first response is don’t write checks to your investment professional’s name, and don’t sign random forms that are suddenly shoved under your nose.

Also, when you’re with a big-name firm, and such fraud is discovered, all the money is reimbursed to the client, and the investment professional is then prosecuted.

If you’re dealing with an investment professional who’s a one-man shop, it might be easier for him/her to get away with fraud, and harder for you to prosecute. So here’s what I would do if I were suspicious….

Ask your investment professional for an explanation of the thing that you noticed that seems wrong. If you’re not satisfied with the answer, then call the branch manager to arrange a meeting or a phone appointment. Tell him/her why you’re coming, so that he/she can look at the accounts and do prep work. If you don’t have your statements, just say so. The manager’s secretary will get them from the computer.

Lots of people aren’t good at reading their statements, but the manager is good at it. If you have very specific concerns, speak them. Don’t spend a lot of time expressing your fears and your life story, just get right to the point. For example, “I owned the XYZ mutual fund, and now it doesn’t appear on my statement,” or “My account value was $60,000 just a few months ago, and now it’s $32,000. What happened?”

Another good course of action would be to find a friend who’s good at math — presumably they’ll be able to read your statements fairly easily and quickly. Let them come with you as you start making inquiries. If the answers are not credible, and you suspect fraud, call or visit any major financial firm (bank, brokerage, insurance). Ask a manager what your next step is. He/she will give you contact information to the appropriate authorities. I am confident that fraud will be investigated promptly. It was never my experience, while in the investment industry, that problems like this were swept under the rug.

Crista Huff

President

GoodfellowLLC

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