Brokers Gone Wild (Part 6)

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On December 5, 2008, in Investor Protection, Investors at Risk, Scams, Scandals, Securities Industry (general), by Investor's Watchblog

We’ve come to that time in our walk through the life of an investment scam when you, as the investor, are patting yourself on the back. The checks are coming, and you are making financial decisions on the assumption that they’ll continue to arrive on schedule. Maybe you bought that lake house you always dreamed [...]

We’ve come to that time in our walk through the life of an investment scam when you, as the investor, are patting yourself on the back. The checks are coming, and you are making financial decisions on the assumption that they’ll continue to arrive on schedule. Maybe you bought that lake house you always dreamed of. Maybe you retired early.

After spending a few of the checks, you start to wonder why you aren’t ‘letting it ride’ by reinvesting the checks. If the broker doesn’t suggest it, he will always confirm for you that it’s allowed, and praise you for making such a wise choice. So, rather than a check each month, you look forward to receiving your monthly statement. Month after month it shows your account balance rising so quickly that you begin to wonder whether Buckingham Palace is on the market.

You spend more time on the golf course and pick up the tab at the 19th hole. You let slip that you’ve found a fantastic investment that is producing guaranteed income at a rate no bank could ever promise. Your friends beg you for the details, and you put them in touch with your broker.

When you see your broker, he is driving a car worthy of any balding man in the midst of a raging mid-life crisis. He has box seats at the stadium. His kids go to private school. His wife is wearing a bigger diamond. He’s on the list of the top donors to the local United Way and other charities. He seems to be enjoying life almost as much as you are. But he isn’t. Next time we’ll look at things from his perspective.