Helping You Avoid Life's Financial Mistakes

Did You Get Churned By Your Investment Professional

July 8, 2009 By Leave a Comment

securities scamMost people don’t realize it but they may have, at one time, been scammed by their investment professional.  I know it sounds crazy but this happens almost every single day.  If you think every investment professional is a saint you are dead wrong.

The Turn And Burn Scam

Today, I will be giving you one example of a client of mine who got caught up in a scam called the ‘turn and burn’.  This is a particular type of scam where an investment professional shifts money from one account to another, in orderto make a commission.

The industry term for this scam is churning.  The dictionary defines churning as “trading excessively in order to earn more in commissions”.  This is a big no-no in the securities industry.  For example, if you had a mutual fund with XYZ Company, they would buy and sell stocks within the fund to earn more money.

Later in this article I will show how you can avoid this scam.

How My Client Got Churned

In the example above, churning happened inside the actual mutual fund.  However there is another way it can happen too and the worst part about it is that you may not even know it happened to you until it’s too late.

In my clients case he had been with me for just over a year when another financial professional called him and stuck his foot in the door.  So what happened?  The representative for another broker dealer convinced him that he would be better off in one of their funds and not the one he currently owned.

You might be thinking, what is so bad about switching at this point if what he has is that much better why not go with it?   First, the current account the client had was only a year old.  To recoup the cost of the sale charge of around 5.5% it would take a few years to do this.   Second, the sales charge he paid on the second fund he switched to was around 6%.

So let’s add this up 5.5% plus 6%.  That’s 11.5% of your money lost in commissions in one year.  Think of it this way you just took an 11.5% loss on your retirement account all because one guy said it would be better for you.  If you would have had $10,000 in your account they would have walked away with $1,150 of your money.

Now how this guy got this trade approved is beyond me.   It all depends on your broker dealer.  Some hold to the rules tight and others are a bit more relaxed.  The company I worked with had a 3 year rule which meant the account had to be at least 3 years old before it could be switched to another account.

They put this rule in effect so situations like the one I mentioned above don’t happen to people like you and me.  The truth is though it still does.  So how can you prevent this from happening to you?

How To Prevent The Turn And Burn Scam

The first thing you need to realize is that anytime money moves somebody is making money.  It doesn’t matter if it’s inside your mutual fund or switching mutual fund companies.  They are making money when it moves.

While it may be next to impossible to keep track of every single fund in your retirement account you can ask your investment professional what all of the fees are inside of the fund itself.  By law, they are required to provide you with this information and also leave a prospectus with you.  A prospectus is a document that shows all the fees and previous performance of the fund.

Second, know that if someone is asking you to switch to another account and you have only had you current account for only a few months or a few years you may not want to switch to avoid the sales charge involved.

Finally, if someone is asking you to switch accounts and they are pressuring you with hard selling tactics, know that they can’t make you buy; this is also against the law.  If you should happen to fall into this situation contact the Securities Exchange Commission (SEC) at www.sec.gov or www.finra.gov to report these scams.

Filed Under: Scams Tagged With: ,

Hotmail Scam Going Viral And Could Cost You Thousands

June 17, 2009 By 5 Comments

In an attempt to help the followers here at Stumble Forward not fall for anymore financial scams I have an important post for you to read today.  Recently their has been an email scam going around scamming people on hundreds if not thousands of dollars.

Hotmail Scam Hits Home

In fact this scam recently hit home a few weeks ago by one of my brothers clients for his website building business.  His client who ran everything for her business through her hotmail account was sent an email something like this.

hotmail_scam

The email was a set up.  It ask for her username, password, date of birth, and country.  This email is meant to look legit.  However it is not.  The thing you should remember is that if this company already has your info they should never ask for it again.

I also want to point out this may not just be a hotmail scam either.  Yahoo and Gmail users may be getting hit by this scam as well.  If you have your own email at your own hosting account you may be less likely to see this email.  I believe it is only hitting the  free email services.

Who Is At Risk

First off anyone who has a hotmail, yahoo mail, or gmail account has the best chance of seeing this email.

If you are someone who doesn’t have much of a technology background dealing with computers or any other form a technology.   Why these people?  Because people with a background in computers and technology will probably understand that this is a scam quicker than someone who doesn’t.  This may not always be the case but it tends to go this way.

Finally, these scammers are looking for those that have a large list of friends to email as well.  This is of course how this scam spreads.

How Does The Hotmail Scam Work

Below is the version of this scam I have encountered.  Their may be other versions of this scam going around but here is what I have seen.

  • First, the scammer sends an email to you telling you to confirm your email details.  Look at the email example above.
  • Second, the individual sends their important email details to what they think is their email provider such as hotmail.
  • Third, the scammers now have access to your account and proceed to lock you out of your email account.
  • Fourth, the scammers send out fake email from your email address.
  • Fifth, the people on the list of person that got scammed receive an email along the lines that they are stranded in Europe and need $2000 to get back home.  In fact this is the type email brother receive from his client.
  • Sixth, normally when someone would receive an email like this they would instantly know it was some kind of scam, BUT now that the email is being sent in their real email address this makes the scam email look more legit.

What You Should Do If You Have Been Hit By The Hotmail Scam

  • Cancel any and all accounts you have set up in that email address.  Do that or change the email address to something else.    Do this especially with any accounts that you have linked to any of your financial information like amazon, paypal, ebay or any other account you send money to.
  • Call or get in touch with anybody that was on your email list and let them know about what just happened.  Tell them to stop using the email address immediately.

The bad thing about this scam it doesn’t affect just you it effects everyone.  It works like a virus taking everyone with it.  If you should happen to get the email like I’ve show above discard it and report it as spam.

If you have more questions about this scam leave a comment and let me know.

Chris

Scam Free

Filed Under: Scams Tagged With: , , ,

Refinancing Soon: Watch Out For This Mortgage Ponzi Scam

May 11, 2009 By 1 Comment

If your looking at refinancing here within the next few months you may want to watch out for this scam.  I recently came across this scam on the FBI’s website and wanted to update you real quick on the situation.

How This Mortgage Scam Works

In this particular case people would asked to invest a large sum of money, usually around $50,000 or so by either refinancing or buying a home at an inflated price.

What the fake lender would do at this point is tell you not to worry about the high mortgage payment because the fake lending company would pay your payments for you in about 5 to 7 years.

How would they do this?

With the so called interest they earned off of your initial $50,000 investment with this fake lending company.  This way you and the fake lender will own equal interest in the home.  To top it off the home owner would also have to pay an administrative fee of around $5,000.

At this point the fake lending company claimed they would invest your money in particular investments like automated teller machines to flat screen TVs.

If you have seen this type program going on in your neighborhood you may think this sounds to good to be true and in fact these companies have gone to great lengths to make their operations seem even more legit by hosting these events at lavish hotels in New York and even in Beverly Hills, California.

The Current Situation On This Scam

You will be happy to know that one company has already been busted for doing this scam, called Metro Dream Homes.  They were caught doing the same exact thing I just described above.  However, I am afraid their are still some of these fake lenders out there.

These fake lenders may be doing things a little different than how I described it but the fact is their will be more scams like this to come.

If you would like to keep on top of these scams you can do that by easily signing up to my RSS and you will receive content like this from me on an ongoing basis.

Till Then,

Chris

This post was recently featured on The Money Hacks Carnival by Strechy Dollar.

Filed Under: Scams Tagged With:

Poll: Have You Ever Been Hit By A Scam

April 23, 2009 By Leave a Comment

As a close to the series on how to prevent and report scams I thought it would be a good idea to run a poll and see how many  of you have actually been scammed before.

Share your input have you ever been hit by a scam?  If you have let us know by contributing to are poll.  You may have been hit by more than one scam sot you can pick at up to two options.

[poll id="4"]

Filed Under: Scams

5 Ways To Report Scams

April 22, 2009 By 6 Comments

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Welcome to the third post in this series on preventing and reporting scams.  In the first post we talked about how to prevent yourself from falling prey to a scam and in the preceding post we talked about the different types of scams out there.

In today’s post, we are going to dive into how to report a scam and who to report it to should you become a victim.  Some ways work better than others so it’s all according to what type of scam it is.

Notify Your Local Police

Depending on the severity of the crime, notifying your local police of the scam might be a good first step.  For example, there was recently a scam in my area where phony vacuum salesmen went around in a white van and robbed unsuspecting victims upon gaining access to their homes.

Another example was where the scammers would call and claim to be representing a local bank. They would then ask questions about the victim’s account and attempt to confirm account details.  This was obviously a scam because a bank would never call you to confirm your information.

These are the types of scams you should report to the authorities.  By informing the local authorities they can get the info out before anyone else gets hit by this scam.

Scams over the Internet such as an email from your local bank needing you to confirm your account information should be reported.  The point I am making is that if the scam is on a local basis you will have the best luck here.

Notify The Federal Bureau of Investigation

On a local scale you might inform the local police but on a more national or international level you may want to look at informing the FBI.  The FBI has an entire division dedicated to fraud schemes.

On their website you will find all kinds of information on different types of scams going on from telemarketing scams, Internet scams, health insurance fraud, to Nigerian letter or 419 fraud.

You can also sign up for their fraud alert here, and get up-to-date information about scams, fraud, or any other schemes.  You can also report a scam or fraud there as well.  If it’s an Internet crime you can report that here, and if it is a crime tip you can report that here.

If you’ve been involved in an investment scam of one sort or another within the U.S., such the scandal involving Bernard Madoff, these organizations are the ones you should be notifying.

The Securities and Exchange Commission ,better known as the SEC, is a government-run organization in charge of overseeing the securities industry.

If you have any tips, questions, want to report investment scams or report a complaint you can do that at the link above.  However, FINRA on the other hand is a self-regulatory organization that is put in place to internally manage broker/dealers.

You can find a wealth of information at the FINRA website.  There you will find everything you need to know before you invest, after you invest, and of course avoiding investment fraud.

You can also do a broker check and learn about the company before you invest with them since every broker and brokerage firm located in the U.S. must be compliant with FINRA guidelines.

The great thing about the broker check is that you will also see if the company is experiencing any disciplinary actions or has suspensions.  This will let you know what kind of company this really is.

Notify The Better Business Bureau

Have you ever felt that a business was scamming you in some form?  The idea behind this organization is to improve the quality of dealing with businesses and weeding out the scammers.

The Better Business Bureau is a great way to check out a business or charity to see if they have any complaints against them. Even if they aren’t an accredited member of the BBB you can still report a complaint.

They have a wealth of info at their website but if you would like to report a complaint you can do that here as well.

Notify Stumble Forward

No, my blog is not a place to report scams and it certainly is not the first place you should go.  The four I mentioned above should be first.  The reason you should notify me here at Stumble Forward is because in some cases there isn’t any information on a certain scam.

As with the Milton Hayward Scam, Laura, a reader here at Stumble Forward could not find any info on this scam.  This is when I offered to post her story here hopefully to draw in a few people who could shed some light on this scam.

You too can share your story or scam you’ve been involved in by going to my Guest Post Page where you can get all the info you need to submit your story here.

Chris

This post was recently featured in the carnival of personal finance by Fire Finance.

Filed Under: Scams Tagged With: , , , , , , ,

4 Common Types Of Scams That Could Hook You When You Least Expect

April 18, 2009 By 1 Comment

phishing-scam1In the last article in this series we talked about some of the red flags you should what out for so you don’t fall prey to a scam.  In this post I will be diving into some of the types of scams that are out there. 

Investment Scams

These type of scams come in all shape and sizes but here’s the gist of it all.  Investment scams will ask you to invest a certain sum of money and in return guaranteeing you a certain return on your investment.

For example, if someone tells you that by buying a certain stock you will be guaranteed at least a 20% return based on the inside information we have on this company.

Now the offer may sound attractive but first off their are no guarantees when it comes to the investment world, especially in the stock market.  The other thing  is that if someone is proclaiming they have inside information on this stock it is illegal to possess such information, but even if they don’t really have the information this is definitely the works of scam.

Here are a couple a tools you can use to detect if an investment is actually a scam.  The first is the Risk Meter.   The Risk Meter is a simple questionnaire that ask you 12 different questions about you and the investment situation you are looking at.  After answering the questions the risk meter will determine the level of risk you are making by investing your money.

The Second is the Scam Meter.  The scam meter does the same as the risk meter but instead will ask 4 questions about the investment which will ask you to describe the investment and the scam meter will let you know if it is a scam or not. 

Internet Scams

If you have the Internet you know how many people out their are proclaiming they can make you million in a matter of weeks.  These scammers will say almost anything to get you to buy into their deal. 

However, like the saying goes, if you it sounds to good to be true then it probably is.  The bad part about this is that people fall for these everyday. 

However with these types of scams their are no tools available to tell you whether a deal on the Internet is really a scam or not. The best thing you can do here is to do your research on what you are buying on the Internet.  Usually just doing a search on google will be a good indicator.  

So just type in the product you are looking at into the Internet and put the word ‘scam’ behind the term and see what comes up.  However don’t just use this as your only indicator, as in the Milton Hayward Scam their was no info on the Internet. 

Telemarketing Scams

Have you ever gotten that  call before were the person on the other end was just trying to sell you something.  I know the feeling.  I’ve been duped with telemarketing scams before.  The worst part is you don’t know if the person on the other side is legit or not.

One evening I got one of those such calls and ended up paying the guy $500 to sell my timeshare for me.  He told me they usually had them sold in 2 months and that I would get all kinds of offers and believe me his story was very convincing.  Well 2 months went by and no offers, no calls, and no money.  In fact I even called the company back and all I got was an answering machine.  In plain words I got ripped off.

In this situation my advice is if I’m not looking for what they are selling and I can’t see them in person I’m not interested.  In others words don’t buy over the phone unless you called the company yourself and you will save yourself a lot of headaches.  Trust me.

Pyramid Scams

I usually don’t see a lot of these scams anymore but here is how it works.  Usually their is a guy at the top who gets you to invest money with their company.  They claim you will get your money back plus interest  in a specific amount of time. 

But it doesn’t stop their.  They will ask you to recruit a few friends and if they invest their money as well you will make even more money because you are a tier above them.  The bad thing about this scam is the guy at the bottom get nothing if the scam goes bust.

When a scam like this was going on in my area a farmer sold his whole farm to invest in what he thought was a legitimate investment.  He ended up losing everything to say the least. 

So in this situation here is what you should look for.  If someone comes to you and is asking you to invest money with them and is guaranteeing a specific return on investment  and recruit a few of your friend while your at it.   This is a prime example of a pyramid scam.

Share Your Story

The worst part about all of these scams is that the scammer is not usually doing just one of these scams.  They may be operating a pyramid scam on the Internet or running an investment scam over the phone.  The point is all scams come in all different shapes and sizes to the small time beginners to the big time criminals.

If you’ve been involved in one of these types of scams feel free to share your story and what you have learned from it. 

Chris

Filed Under: Scams

5 Red Flags To Look For So You Don’t Get Scammed

April 15, 2009 By 4 Comments

istock_000001645239xsmallIn my last article I talked about a lady name Laura who was scammed out of a lot of money by an supposed investment company based out of Hong Kong.  In this post I want to show you what to look for so you won’t become a victim of these scams.

Do You Know When You Are Falling For A Scam

About 10 years ago, I was invited to meeting by a few friends who said, ‘You gotta see this.’  So after hearing them brag about this meeting, I have to admit I was a bit intrigued to see what all the fuss was about. 

While we were on the way, I asked them what this meeting was all about.  They told me it was all about investing some money with a company called Purchase Plus. 

So at this meeting I learned about an investment plan where you give your money to this company, Purchase Plus, and within two months they would send you a check back for the full amount plus a guaranteed extra amount.

Now at this point you might be thinking this is a total scam but when you’ve never been exposed to something like this you don’t know any better.  As a result of going to this meeting I was asked if I wanted to invest money with them as my friends did. I almost agreed but I instead decided to wait and see what happened.

A few months later, a headline came across the news that said that the Purchase Plus Pyramid Scam had been foiled.  My first reaction was shock.  I didn’t even realize I was being scammed.  Purchase Plus had scammed millions of dollars out of people before finally being caught.

As for my friends that bought into the scam, they got their money back but I have heard of a few who lost a lot.  The bad part about this whole situation is that I didn’t even know I was being scammed, and that’s the worst part–you may not know you have fallen for a scam before it’s too late.

So the question needs to be asked, how do you know when you’re being scammed?  Here are a few points to consider.

5 Red Flags To Watch Out For

  • Guarantees. If they are guaranteeing you something like big money, that should instantly raise some red flags. Especially if it’s an investment for money. When it comes to investing money in the stock market there are no guarantees.
  • Your must act now. This is just a gimmick to get you to do something in the heat of the moment especially when your emotions are high so it doesn’t give you a chance to think about it. Remember you all have time to think about it.
  • You’ve won a free gift. If you get this line, run in the other direction. They may say you get something free but you have to pay postage and handling, and as a result you will be enrolled into a membership program that will cost you money every month. I’ve fallen for this before and it was next to impossible to cancel the program.
  • Pushy sales people from unfamiliar companies. If you get some guy calling you on the phone trying to push you into buying something that you don’t want just hang up. Pushy sales people tend to get you all emotional so your logical thinking is out of the picture, making it easier for them to get you to buy. If you have never heard of the company, this should also be a red flag.
  • If they ask for your information over the phone. Sure if your buying something from a reputable company over the phone it’s not a scam but ifsomeone callsyou proclaiming you’vewon a free gift but they need to confirm your identity withyour credit card number or social security number it’s a scam.

Do You Know Of Any Other Red Flags To Watch Out For

Now this isn’t all of the warning signs but these are some of the big ones.  If you have some other warning signs to watch out for leave a comment below.  Also feel free to share your story of any scams you have witnessed or been involved with.

Chris

This post was recently featured on The Carnival of Personal Finance by  The Mighty Bargain Hunter.

Filed Under: Scams

1 Week To Staying Scam Free Series

April 13, 2009 By 1 Comment

This week is a very special week.  This week is all about dealing with scams and how to prevent them.  Throughout the week I will be presenting a series of post talking about how to prevent being scammed, the types of scams, most important how to report scams.

Why I’m Doing A Series

First off, I wanted to do more than just a post.  To many people are working to hard to get out of debt and save up money only to be scams out of their precious dollars.

Secondly, I felt that just putting out one post wouldn’t do the topic justice.  I also realized after I started to write the post I had so much to talk about I could have easily made that post a 3000 word article.

Finally, I wanted to chunk things down to a few smaller articles so it would be easier for you for you to digest and read.  Thoughout the week I will also be linking all the post back to this article so you will be able to access each article from one location.

The Article Series

5 Red Flags To Look For So You Don’t Get Scammed

4 Common Types Of Scams That Could Hook You When You Least Expect

5 Ways To Report Scams

Poll: Have You Ever Been Hit By A Scam

Chris

Filed Under: Scams

Readers Story: Milton Hayward Scam Ripping Off People

April 9, 2009 By 88 Comments

Recently, I had been contacted by a lady named Laura who had been involved in a pretty bad scam where she was asked to invest money with a company called Milton Hayward[Is this the company's name or the man's name or both?].  Her story is what follows.

Laura's Story About The Milton Hayward Scam

My family and I believe that we have been involved in a large investment scam. We were contacted by a company called Milton Hayward about 8 months ago; they wanted us to invest in a company called 'For-gold'. After careful consideration and further persuasion from Milton Hayward, we did it...we invested and sent a large sum of money over to Hong Kong.

We were dealing with three main contacts at Milton Hayward - John Cannon, Mark Harvey and Micheal Gellard. The investment was said to be a signed deal and we were scheduled to have our money back plus all the extra within 6 months! Then they kept on asking for more and more. We were trapped!   We felt scared to lose our money and struggled to hold on to the fact that they were telling us that we would get it back soon.

It is now clear that this is what 'boiler room' scams are all about...but we thought we had checked everything and were too trusting in what they had said.

Our present mission is to find more people that have been burnt by this company in order to fight back. I know we have probably lost all our money but I want to help others and try to make people more aware of the dirty scumbags that are out there!

Have You Been Involved Or Have Information

I really feel bad for Laura and her situation.  I've fallen for my share of scams so I know how she feels.  The worst part of all: She has been searching the Internet and can't find any info about this scam.  I know because I've tried myself.

This is where you come in.  If you have any info on this scam please leave a comment below. If you have been a victim of this scam, please feel free to leave your story below as well.

Together, we can all work towards exposing these criminals to prevent others from falling prey to this terrible scam.

Next week Monday I will be posting an article on how to report scams like these and what to do.  One thing I've noticed is that once people have fallen for scams like this, they don't know where to turn next.  In that post I hope to take some of the mystery out of reporting scams.

Till Then,

Chris

This post was featured in Money Hacks Carnival by The Consumer Boomer.

Filed Under: Scams Tagged With: ,

Payment For Gold Scandel

February 13, 2009 By 6 Comments

Yes the scammers are at it again.  Actually it really isn’t a scam it’s more of a scandal and maybe you’ve even seen these payment for gold ads on TV.  It seems as if these companies sprung up all at once.  In fact you may have even seen the cash for gold commercial during the Super Bowl a few weeks ago.  If you didn’t take a look below.

So you may be wondering if these are legitimate companies then why are they considered a scandal?  Well that is what we are going to discuss today. 

How Does The Payment For Gold Scandal Work?

Recently these online companies have been taking advantage of people.  For instance recently I read about a man who sent in around $200 to $300 worth of gold.  Sounds good so far right, but instead of getting a check back for a few hundred dollars he got back a check for 15 cents.

WHAT!

Obviously, he got ripped off but could have this been prevented?  The sad truth is yes.  This could have been prevented in so many different ways.  Later in this post I will explain how you can prevent this from happening to you.

What Does This Got To Do With Getting Out Of Debt?

First off, it has a lot to do with getting out of debt.  With the current recession going on at the time of this writing and the struggle for people to pay their bills most people are looking for about any way they can to get some extra cash. 

Second, they see the commercials on TV and the Internet telling them it’s so easy and you’ll get a check for your gold, but here becomes the real problem.  Once you send them your gold how much are they going to send you back?

Are they going to send you back a check for the current market value?  Are they going to have someone assess the value?  These simple question raise a lot of red flags with me and I hope they do with you as well.

How To Prevent A Payment For Gold Scam?

So maybe you still want to sell off some of your gold jewelry but don’t know how to go about doing it.  Well it’s actually very simple to do.  Follow my instructions and whatever you do don’t send it to one of those online payment for gold places.

  • Get an appraisal of your gold.  This is really the first step once you’ve figured out what you want to get rid of.  This may cost you a little bit of money but will be well worth it.  With an appraisal you now have bargaining power selling your jewelry.  If the appraiser says it’s worth $300 and someone says they are only willing to give you $150 you can use the appraisal as a way to bargain with the buyer.
  • Sell to local buyers in person.   By selling to local buyers in person it will do a few things for you.  First, the person buying your gold has a physical location that you can go to.  If you send it to some online company and end up getting screwed what will you do then?  Second, you will be able to talk to them to work out a deal unlike the online businesses were you get whatever they send you.  This means no negotiations and not enough zeros in your check. 

Have You Ever Been Caught In This Scam?

Have you been burned by this scandal?  Feel free to share your story and leave a comment.  However, if you have managed to have a good experience with these online payment for gold companies feel free to share those stories as well. 

To staying scam free,

Chris

Filed Under: Scams Tagged With: ,
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