Trust and financial advisor - do they still go together?

Names like Bernie Madoff of New York can create doubt for investors. Even east Tennessee is not immune. Dennis Bolze of Sevierville made recent news when several investors claim to have lost money and Mr. Bolze can no longer be located. The amount of funds stolen and then misused by financial advisors who have crossed the line is astounding. Why they do it may never be answered to our satisfaction. The harm they create can rarely be repaired. Because of the actions by a few bad advisors, is it appropriate to avoid the profession? In my eyes, I say ‘NO’.

I know the level of services provided by my firm and the benefits our clients receive. But, when these headlines occur, suspicion cannot be far behind. I am certain there are many other advisors and firms in our area and across the nation that still deserve your trust and many are sticklers as we are for following the rules to safeguard our clients. But, when a few bad apples gain the spotlight with the damage they have done in the millions and billions, it can be hard not to have doubt about the industry itself.

In the U.S., there are tens of thousands of professionals whom individuals and investors place their trust in everyday. In Tennessee alone, there are over 125,000 licensed insurance professionals. Per FINRA’s website (Financial Industry Regulatory Authority), there are more than 665,000 registered representatives (brokers) in the U.S. Then, there are the mortgage brokers you expect to provide a fair service when you finance or refinance a home. There are the thousands of bank and credit union loan officers and tellers. There are also trust officers. The vast majority of these professionals do their job with many of them excelling. No headlines exist when one does a good job or goes beyond their required responsibilities. We quietly do our jobs and do our best in taking care of our clients. But, when a bad apple shows up, it can be egg on all of our faces. The damage from only a few can create a ripple that affects an entire industry.

Can you avoid being taken? Are there steps you as an investor can take to protect yourself? The answer to both of these questions is yes. There are many simple steps that can assist you in finding a reputable and trustworthy advisor.

Gain limited knowledge about investments. You do not need to become the expert, but knowing a little may prevent someone from taking advantage of you.

Knowing what investment returns are reasonable for money markets, bonds, and equities may alert you to the scam when higher than reasonable rates are promised.

Promises of high returns come with risk. Any investment or advisor promising high returns with no risk should be questioned and researched thoroughly.

Confirm through the state or federal agency all of the licenses the advisor holds and check to see if there are any disciplinary actions against the advisor.

Never sign blank or incomplete applications.

Always make your home or a personal mailing address the address of record on all investments, thus statements come to you and not the advisor.

Be sure you receive a confirmation direct from the investment company when money is invested.

Never make a check out to the advisor, unless you are paying for personal services such as tax return preparation or accounting services.

In the case of Bernie Madoff, I am amazed at the size and sophistication of many of his clients, and yet they were duped by Madoff and potentially his team. It was as though he created such an impressive client list that each felt the others were making sure Madoff was on the up-and-up, only to find out in the end he wasn’t. In this case, had several of the above actions been taken, an investor could have been alerted to potential problems.

Today perhaps more so than any other time, managing personal investments can be challenging and demanding. Do not let names like Madoff cause you to go it on your own. But, do your homework in finding and advisor worthy of your trust. I have said on many occasions, there are a number of CFP -- Certified Financial Planners™ in our area, and you should be able to find one who can serve your needs.

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