Over the last few years, an increasing number of headlines about people who have lost their lives’ savings due to ponzi schemes have appeared. Unfortunately, this type of personal devastation is not restricted to North America; in fact, it’s a worldwide problem. Luckily, there are things you can do right now to ensure that you don’t also become a victim.
Step 1: Do your research — How well do you know your advisor?
The best way to protect yourself against fraud is to be proactive. If you’re in the market for a new financial advisor, ask your friends and family for a referral. Has the advisor been well trained? Do they have a strong foundation in financial education and certification? Do they work for a reputable company? If they’re independent, would they be recommended by any of their current clients? It’s important to check their credentials with the Financial Advisors Association of Canada, the local Better Business Bureau or the local regulatory body’s information centre or website. Remember that an advisor who sells insurance products must be licensed by a provincial oversight agency.
Step 2: Keep a cool head
When you meet with your potential advisor, make sure you’re not swayed by a persons’ title or by their sales pitch. Be particularly wary of anyone who promises high returns or asks you to write a personal cheque to them instead of their firm. And remember, a lack of transparency should be considered an immediate “red flag”.
- You should never be asked to keep a secret
- A representative should never avoid stating who they work for
- You should never feel pressure to invest in “sure-things”
Step 3: Learn all you can
Before purchasing an investment or insurance product, it’s important to identify your financial needs and to learn about the different products. For example, there are typically three types of life insurance:
- Term life insurance provides coverage for a set period of time
- Permanent life insurance provides lifetime coverage
- Universal life insurance provides lifetime coverage and tax-free savings opportunities
When you meet with your advisor, remember to ask questions like:
- Will the premiums go up?
- Are the returns guaranteed?
- Are there any related tax implications?
Step 4: Be patient
Congratulations! You’ve done your due diligence in terms of securing your financial future and avoiding personal fraud. But, finding the right advisor may take time. Stay the course and be patient. To learn more, visit your province’s financial services regulatory body and the Canadian Life and Health Insurance Association.
Bill Clunas is a Certified Financial Planner with Desjardins Financial Security Independent Network and Branch Manager-Mutual Funds with Desjardins Financial Security Investments Inc. located at 114-700 Richmond Street, London, Ontario. Phone: 519-438-1730 Fax: 519-438-6518.