Finance 1. Take your time Fraudsters don’t want you to think too much about the “opportunity” at hand. They don’t want you to dig too deeply into their investment data. And they certainly don’t want you to ask them difficult questions. So, they use high-pressure sales tactics, limited-time offers and other tactics to encourage you to commit your money quickly. It comes down to this: if you need more time to thoroughly research an opportunity, take it. If you need time to think about how it fits into your overall financial plan, take it. If you need time to talk it over with your partner, your friend, your advisor, your accountant or, heck, even your dog − by all means, take it. And, if anyone tries to make you feel silly or stupid or amateurish about taking that time, tell the person to buzz off. Or better yet, tell the authorities. 2. Write cheques to licensed, registered investment dealers One easy sign of fraud is when the fraudster asks you to write a cheque to him or her personally, rather than a licensed, registered investment firm. Oh, they’ll use a lot of creative excuses to explain why you need to do it this way: you’ll get into the opportunity faster; you’ll avoid taxes; you won’t have to pay extra fees; and so on. But the real reason is always the same: they want to make it almost impossible for you to get your money back. Rule of thumb: always make deposits, contributions or investment payments payable to firms registered as licensed investment dealers, not individuals, not numbered corporations, not offshore bank accounts, not anything that seems fishy or out of the ordinary. Don’t know if someone’s registered? Check with your securities regulator (most have searchable databases of dealers licensed to operate in the jurisdiction) andmake sure. 3. Can’t understand it? Then forget it. This is an obvious, easy rule that could save a lot of people a lot of financial heartache. Remember what we said about jargon, data and charts: the more complex it is, the harder it is to understand, the less it seems to make sense, the greater the chance that someone is trying to hide something. Never be intimidated by what you don’t know. Instead of being snowed under by fancy charts and PhD-level jargon, rely on your good old-fashioned common sense: if you can’t figure out how it works, either ask an independent professional to explain it to your satisfaction, or don’t invest. 4. Do your homework Fraudsters will talk all day about the opportunity that they’re trying to sell you. And they’ll give you lots of data and info and analysis and charts to back it up. But all of this promoter-supplied material should never be a replacement for your own homework: you’ll need to analyze the data, gather different opinions and consider how the investment fits into your overall financial plans. Here’s another rule for you: never take data, projections or promises from the promoter on face value. Trust only what you can independently verify. And if you can’t? Move on. 5. Does it depend on tax advantages? Get a second opinion. A lot of frauds promise outstanding returns because of tax writeoffs, credits, rebates, refunds or some kind of special treatment that allows you to recapture previous years’ taxes. Are such strategies effective? Will they be accepted by the CRA or other tax authorities? There’s probably no way for you to know. But there is someone whowill know: a qualified accountant or tax lawyer. A 30-minute review of the opportunity is likely all that they need to tell you whether the tax advantages are legitimate, or whether they’re empty promises. Sure, you’ll probably have to pay a nominal fee for such advice. But it could be the cheapest protection you’ve ever purchased. 6. Treat testimonials with a grain of salt − even when they’re from your friends Fraudsters typically put in a lot of time to create the aura of “social proof ” around the opportunity that they’re selling − testimonials, recommendations, reviews and other declarations from “satisfied customers.” All of these are intended to allay your suspicions and anxiety about the investment − if others see the opportunity, you should too! When it comes to investments, never rely solely on the positive reviews of other people. That includes those from friends and family members, who could be caught up in a fraud without knowing it. Instead, do the homework and find out for yourself whether an investment makes sense. 7. Above all else: trust your gut If you’re like most people, you probably remember a few times over the years when a “little voice” tried to protect you from bad decisions (or at least encouraged you to think twice before you acted rashly). And, if you’re like most people, you probably remember at least a couple of times when you ignored that little voice − to your detriment. Don’t let that happen when it comes to investing. Call it intuition, call it a sixth sense, call it a gut feeling, call it a little voice, call it whatever you want − if it’s reminding you that things which seem too good to be true usually are …well, it’s usually wise to listen. Simple strategies to protect yourself from fraud Here’s the bad news: there’s no shortage of dishonest people who are willing to do nefarious things to take money away from honest people. But here’s the good news: protecting yourself from them isn’t all that difficult. In fact, it often boils down to simple common sense. Here are seven common-sense tips that can help. 32 | www.snowbirds.org
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