FINRA Offers Five Tips to Help Investors Avoid Getting "Fooled"
In a release issued prior to April 1st, FINRA provided five tips for investors to help them avoid "getting fooled" by fraudulent advisors and products.
The five tips were as follows:
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Know Whom You are Dealing with. When choosing a financial advisor, interview a selection of candidates and thoroughly check their backgrounds by using FINRA BrokerCheck®.
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Understand How to Work with Your Advisor. Communicate your investment goals to your advisor and make sure you fully understand a prospective investment by asking about its risks and rewards.
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Be Aware of Different Kinds of Investments. Consider which combination of investments could best further your goals, and make sure to fully understand everything about a product before investing.
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Watch out for Warning Signs of Fraud. Exercise "healthy skepticism" about persuasive sales pitches, particularly "guarantees, unregistered products, overly consistent returns, complex strategies, missing documentation, account discrepancies" and pressure tactics.
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Ask Questions. Ask detailed questions about the product: "[H]ow does this product work, how can it go wrong, is there a cap on the return, is it a registered product, can I sell it quickly and easily, how is the seller compensated, etc.[?]" Reject the proposal if you are unsatisfied with the answers.