International Financial Securities Regulatory Commission: Fool-proof Investing Tips

P. T. Barnum is credited for giving us the adage: A sucker is born every day. In fact, it does not have to be April Fool’s Day for both sides of the deal (the fool and the fooled) to sprout like mushrooms after the thunderstorm. And since April brings both rain and brain-drain, it is quite appropriate that it is also Financial Literacy Month. The Financial industry Regulatory Authority (FINRA) provides five tips to inform investors on how to protect their money from fraudsters. 

Gerry Walsh, the Senior VP of Investor Education at FINRA, said, “April Fool’s Day comes only once a year when people play on each other for fun. But fraudsters go about their practice all-year-round to fool people out of serious money; and, to really begin having fun and keep your money as well, make sure we know how to become more informed investors.”

Here are some tips:

1.       Get to know the people you transact with. Be very choosy when it comes to picking a financial advisor, clearly explaining your financial goals and requirements, the types of individuals or firms you can feel you are comfortable working with. Get referrals from your associates and friends and do the dirty job of interviewing a chosen few you believe will satisfy your standards. Ask as many questions as you can: for example, if they have had experience dealing with people who have similar needs as yours; do some background investigations; ask how they want to be paid and if they charge other fees and additional expenses for doing certain related tasks. Make sure you work only with people who are duly registered and also look up their employment and regulatory track records. To facilitate this step, you can do a quick and easy check with BrokerCheck® for free.

2.      Learn how to collaborate effectively with your financial advisor. Be honest and transparent about your investment goals and the risk level you can handle. Do an in-depth study before entering into an investment contract. Keep in mind that reading the sales brochures or promotional materials is not enough. Strive to gain a full comprehension of the investment or strategy by inquiring about all possible benefits and risks—as well as how the investment will work out to obtain your objectives. Always keep a watchful eye on your account, as well as on fees, statements of account and transaction validations. Be careful of sales pitches that contain unrealistic promises about productivity or guaranteed profits.

3.      Learn the various kinds of investments and how they can help you attain your financial objectives. Each type possesses its own unique features, liquidity, costs, risk levels and use. Consequently, inquire about these aspects and think of how you can combine them effectively to maximize rewards. You can accomplish this task by assuring that you have a working knowledge about bonds, stocks, bank products, investment funds and others for specific uses, such as college or retirement savings. Always read first and comprehend everything you can about a product’s features and requirements before investing in it or signing a contract.

4.      Watch out for danger signs pointing to fraudulent deals. In particular, take note of too consistent profits, guarantees, intricate schemes, unregistered products, incomplete records, account inconsistencies and very persistent sales personnel. Most financial advisors can be trusted; still, you might encounter a few who will abuse your trust upon them. Learn how to determine how con artists work in their game and keep a healthy dose of skepticism.

5.      Never be shy about asking questions. In case you forgot the last tip we mentioned, recite this mantra as if you were home alone like Macaulay Culkin: This is MY MONEY and I will protect it with all my life! Do not bother about how others may think of you because every question you have is a valid inquiry of a person who wants to learn. Ask how a product works, what bad thing can happen to it, how much it can make at the most, if it is a duly-registered product, if you can sell it readily and at any time, how does a seller make money, and others. If any of your queries are not satisfactorily answered, simply say "No". Only a fool risks his or her money without the proper assurances.

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Interested investors can get more information on the disciplinary record of any FINRA-registered broker or brokerage company by utilizing FINRA's BrokerCheck for free. In 2015, as many as 71 million reviews of broker or firm records were conducted using this free service. Investors can access BrokerCheck by visiting www.finra.org/brokercheck or by calling (800) 289-9999. Investors can browse the site to obtain copies of disciplinary actions and her disciplinary records in FINRA's Disciplinary Actions Online database. They can also get in touch with FINRA's Securities Helpline for Seniors at (844) 57-HELPS for further assistance or to make inquiries about any concern they have with their investments and brokerage accounts.

The Financial Industry Regulatory Authority (FINRA) is recognized as the biggest independent securities regulation agency for all firms operating in the United States. FINRA commits to safeguard the interests of the investor as well as the integrity of the securities market through efficient regulation and appurtenant compliance and technology-based systems. FINRA covers substantially every aspect of the securities market – beginning with registration and education of all industry players to evaluation of securities companies, writing regulations, enforcement of such regulations and the federal securities laws, and the education of the investing public in general. Moreover, FINRA conducts investigations and other regulatory tasks for equities and options markets, including trade updates and other related industry services. Finally, FINRA serves as the main administrator for resolutions of disputes for investors and securities firms.