SmartMoney Blogs

A blog about living in and planning for retirement

How to Fend Off Financial Fraudsters


There’s no shortage today of financial advisers who are eager to help you manage your retirement savings. This resource can help you identify those individuals who are more interested in helping themselves – at your expense.

The “Consumer Guide to Financial Self-Defense” highlights behaviors that “warn of fraudulent or unethical practices on the part of a financial adviser.” Produced by the Certified Financial Planner Board of Standards Inc., the 28-page booklet features a series of 10 “red flags.” Each flag identifies a common situation where you may be victimized; describes the warning signs of fraud or abuse; shares actual examples in which individuals were cheated; and shows what you can do to protect yourself.

The chances of encountering trouble may be greater than you think. According to the board’s survey of certified financial planners, 60% of respondents knew a consumer “who had experienced fraud or abuse at the hands of another adviser.” What’s more, the most likely targets of such fraud were older adults, ages 61-75.

Here are some of the red flags and “self-defense moves”:

Paperwork. Many advisers will offer to fill out paperwork for you: applications for insurance, investor profiles, rollovers involving individual retirement accounts, etc. The problem: errors in doing so. Some mistakes, of course, are simply that: mistakes. But an unethical adviser might falsify information. To start, never leave blanks in paperwork that someone else could fill in without your knowledge. And always ask your adviser to give you copies of any and all completed documents.

Checks. Retirement planning, not surprisingly, involves writing checks. Say…to buy a financial product. But beware the financial adviser who says: “Just make the check payable to me.” (Or even worse: “Just leave the payee line blank; I’ll fill it in later.”) Your money could end up going into your advisor’s personal account instead of the investment. In short, “never make a check payable to an adviser,” the CFP Board cautions, “and never leave the payee line blank.”

Pressure. And adviser might tell you that a financial offer is “good for today only,” or that “only a few opportunities remain to invest.” If you hear such words, take a big step back. The adviser might be trying to “meet sales quotas or earn bonuses,” the board notes. With any possible investment, give yourself plenty of time to weigh the pros and cons, speak up if you’re feeling pressure, and ask – and understand – how your adviser earns his or her pay.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (0)

    • Be the first to leave a comment on this blog.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.