Another Mini-Madoff?
Posted on June 3, 2010
Filed Under Personal Investing, The Economic SceneIn the financial world, we’re not supposed to label anything a “sure thing.” But here’s a pretty safe bet: right now, thousands of smart Americans are being scammed in an investment scheme.
The evidence is overwhelming and stretches back through our history, from Charles Ponzi to Bernard Madoff, to the current allegations against “financial advisor to the stars” Kenneth Starr.
This Starr case (he’s accused of running a $30 million investment fraud) is especially exasperating, coming as it does while the stench from the Madoff disaster is still rank in the air. Starr’s clients include bold face names from the worlds of entertainment (Martin Scorsese, Uma Thurman, Wesley Snipes, Sylvestor Stallone), politics (Henry Kissinger, Caroline Kennedy) and media (Steven Brill).
These celebrities, you might assume, would be wise enough to avoid becoming ensnared in questionable business practices. Yet aside from the successes they have achieved, they are not necessarily any more financially astute than average folks. Of course, they likely are used to delegating what they would consider mundane tasks. That might have been the core of the problem.
Regardless of the outcome of this particular case, we know that far too many investors rely on little more than a friend’s recommendation as a green light for signing on with a broker or investment manager.
From our perspective it is frustrating because, in the eyes of some, all financial professionals get tarred with the same brush when these stories hit the headlines.
Admittedly, there is no short cut to vetting your investment professional. As a start, you need to grasp the fundamental strategies and philosophies the advisor uses. Are there commissions involved? If yes, be sure you understand them fully, and where every penny of your investment goes.
And if possible, ask to see some sort of track record – on paper, not a verbal assertion.
Be wary of any obvious red flags, such as an advisor who refuses to keep your money in a custodial account at a major brokerage firm. All good advisors keep a wall between themselves and their client’s money.
Personally, I like it when prospective clients have done their homework about Weber Asset Management. They have an appreciation for the complexities involved in the decisions we make for their accounts.
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