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VOL. 127 | NO. 37 | Thursday, February 23, 2012

Dana and Ray Brandon

Baby Boomers, Watch Out


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Ray’s Take Some Baby Boomers desperate to make up portfolio losses due to the financial crisis or “catching up” from years of under-saving are being victimized at record numbers by a number of financial frauds. In one year, the number of criminal complaints and other financial regulatory actions involving investors 50 or older more than doubled.

Scam artists know that boomers on the cusp of retirement are looking for a quick fix to their ailing investments. They stand ready with a wide range of financial offerings that can be hard to resist, often involving Ponzi schemes, unregistered securities or self-directed IRAs. Worst of all, it’s often very difficult for the average person to spot the fraud. After all, a lot of smart, educated people were taken in by Bernie Madoff and Allen Stanford.

What can you do to protect yourself? The best way is to use the expertise of credentialed advisers with solid records on all of your financial decisions. Barring that, at least be aware of warning signs that an investment scam is in the works.

First of all, always insist on printed information, such as a prospectus or annual report. Then ask questions about the details. Many deceptive sales pitches leave out key financial facts or act as though federally required disclosure documents are not really important.

Be wary of any investment opportunity that promises quick profits, pressures you to move quickly or encourages you to sell other investments or borrow funds to get in on “the deal.” Words like “guaranteed” and “limited offer” should also arouse suspicion.

Finally, be certain that assets are custodied separately from your adviser. Basically, if it sounds too good to be true, it probably is. Don’t take any chances. Get the advice of a financial professional you trust.

Dana’s Take Bernie Madoff was successful for so long because clients referred him to their friends. Madoff’s clients felt like they were doing their friends a big favor, when in fact it was the opposite. The circle of fraud continued to widen, largely because it was built on the trust of friendship.

It’s good to trust your friends, but when it comes to any financial investment, a healthy dose of skepticism is always called for. After all, one’s friends probably devote about the same amount of time investigating and evaluating investment opportunities as you do – next to none.

A friend’s euphoria at “finding a great opportunity” is not the same as the careful analysis of a professional financial planner. However, it can be easy to find yourself swept up in the excitement and make a bad financial decision based on friendship rather than facts.

Just think of that old line parents often used: If all your friends jumped off a cliff, would you jump, too? Keep your feet firmly on the ground.

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.

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