Would you hire a financial adviser who has a track record of deception?
Of course you wouldn’t, so why are you? Because you aren’t really doing your due diligence.
Like you, I’m tired of reading stories about Indiana financial advisers committing acts of malfeasance. I can rattle off the names of over a dozen advisers who’ve either lost their licenses or ended up in jail. And as you will see, there were breadcrumbs.
But first, every profession has its bad apples. There are bad doctors, lawyers, clergy, police officers, teachers and politicians. And while reading the horrific nature of those bad actors’ misdeeds certainly bothers me, I still find myself the most perplexed by the crimes of unscrupulous financial advisers.
I often find myself thinking of a trusting client when they first receive the news they were duped. I feel their fear. I feel their shame. I feel their disgust. It makes my skin crawl.
I know this because, on one awful day, a day I’ll unfortunately never forget, I got to witness a retired couple learn for the first time they had been maliciously scammed. The oxygen seemed to be sucked from the room. I was instantly filled with rage. The act of theft was as brazen as it was heartless.
Your investing decisions are generally driven by fear and/or greed. Guess who else knows this? Crooks. They will detect your fear, stoke it, feed it and then, boom, you’re in trouble. Is greed your vice? If you lean too far over your skis, they’ll smell it, stoke it, feed it and then, boom, you’re in trouble. If you sense your natural leaning toward fear or greed are being stoked, hit the brakes.
Are you smart? Yes? You are not immune to crooks. Are you an investing novice? Yes? You are definitely not immune to crooks. Did your career success yield you tens of millions of dollars? Lovely, you’re not immune.
I can’t tell you how much I’d love to give you the names of the dozens of central Indiana advisers who’ve been both accused and convicted of financial crimes, but I honestly don’t want to deal with the personal/legal repercussions of naming names. Besides, the vast majority of them are banned from the industry and can’t do investors any more harm. Feel free to Google “financial adviser fraud cases Indiana.” Be sure to leave yourself plenty of time in your schedule.
There are crooks at tiny firms and crooks at mega firms. There are pseudo-celebrity crooks, and crooks you’ve never heard of. There are male crooks, and female crooks, but if I’m calling a spade a spade, mostly male crooks. Some are driven by greed. Some are driven by addiction. And some are driven by ego. Some are amazing liars, and some might slip up and expose themselves if you do enough due diligence.
Here’s how you can do your due diligence.
If a person is speaking to you specifically about your investments, they are offering you securities advice. This means they need to be registered and licensed to do so. The very least you should do is verify that they are, in fact, registered and licensed. First go to brokercheck.finra.organd search for both the person’s name and their firm’s name. Look for disclosures. Read the disclosures. You might even be sent to the SEC version of the site, if they are in fact an “investment adviser.” Read about them there, too.
In one notable case from about eight years ago—trust me, you saw the article in IBJ—the financial adviser in question had a rather serious customer complaint on his record from nine years prior in 2006. In other words, had his clients gone to BrokerCheck, they would have known something didn’t smell right, and they could have moved to another adviser.
And in another world-famous case of fraud and deception out of Indy, the adviser in question had disclosures on his record seven years before his multistate manhunt, after a faked plane crash.
Additionally, if you are being offered insurance products, go to the Indiana Department of Insurance site, and check the status of the person’s license there, too. In at least one quite notable case of fraud here in Indiana, the adviser in question didn’t even have an insurance license, yet he was offering insurance products.
Go to the Indiana Criminal Records database at mycase.IN.gov and look up your adviser. If you see multiple felonies, is that someone you want managing your financial future? Youthful indiscretions are one thing, but serious crimes are another. A lot of people share the same name, so be sure to verify physical addresses and physical descriptions.
In full disclosure, my criminal record consists of a handful of speeding tickets and a clerical error in 2010 that had me driving on a mistakenly suspended license. Those who live in glass houses, right? Don’t worry, it was corrected and dismissed. But I did speed. Boy, did I speed.
Don’t forget to search your adviser’s firm’s legal name in the Business field of the site, too. Be sure to include the LLC or Inc. You’ll find any lawsuits the firm is involved with.
Needless to say, numerous cases of notable financial fraud by advisers in Indiana were predicated by their arrests on non-financial, criminal charges. Most of the time these arrests show up on BrokerCheck, but if they are only insurance-licensed and not securities-licensed, you’d never know about their arrest. That’s why you should do a separate check.
Think of it like Yelp. I know I’ve avoided spending $40 at a restaurant due to a bad Yelp review. It’s time for you to avoid trusting your life savings to someone who has “a bad Yelp review.”
There are people in my life, in one capacity or another, who have had brushes with the law. People make mistakes. I get it. I will still root for them and love them as a human. I just don’t want them to be my financial adviser. I spent several minutes thinking about this. I think I’m OK with just about every other profession having criminal charges, within reason. But not my financial adviser.
Do you know who gets even more infuriated about this than you and I? Honest financial advisers. How do I know this? Because they text and email me the arrest and indictment articles in droves. And at least half the time, the article arrives with pithy commentary in the flavor of, “Told ya.”
Do not feel shame. Do not let your pride get in the way of a gut feeling that something’s amiss. Unashamedly ask your adviser about their BrokerCheck report. Ask them to pull it up during your next appointment. They won’t mind. In fact, if I were a financial adviser (which I’m not), I’d give every single client and prospective client my BrokerCheck report.
One final note. If you’re reading this and you were the victim of one of these unscrupulous men, I promise you I’m not victim blaming or shaming. Like you, I don’t want one other person to go through what you went through. I’m so sorry your faith and trust were violated.
You have your homework. Get to work.•
Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges. Email your financial questions to email@example.com.