Protect Yourself From Crooked Financial Advisors

Now that Eduardo Diaz, a former Ocean Springs Financial Advisor, plead guilty to financial crimes against his clients, what can the people of the Mississippi Gulf Coast take away from this? Many people have questions about the industry and the people in it. Who can I trust? What can I do to protect myself? You can drastically reduce the chance of being scammed by being proactive.

Here are 3 RULES to help you avoid becoming a financial scam victim when working with a financial advisor.

1. Never lend money to an advisor. It is illegal for an advisor to borrow money from clients and it should never be done.
2. Never invest directly with the advisor. Your retirement account or investment account should be held at a third party custodian, not at the advisors firm. This is what allowed Bernie Madoff to cover up his Ponzi scheme for decades. Having a 3^rd party hold your investment allows the advisor to manage the investment at arm’s length. Checks that are written for your investments should always be to that third party company and not in the adviser or their company’s name.
3. Don’t invest in anything you don’t understand. There are plenty of simple investments that work very well. If you don’t understand, don’t do it. Even if it means having to settle for a lower expected return. It is not worth the risk.

There are 4 other guidelines that will go a long way in giving you added confidence about the advisor you decide to work with.

1. Ask for referral from your friends to see who they work with, move slow when you first meet the advisor. You don’t need to invest with an advisor the first time you meet them. Sleep on it a night or a week and then make up your mind.
2. Get references from the advisor. Specifically, other clients that have invested in similar investments as the one you are considering.
3. Don’t let one bad apple deter you from getting advice from a legitimate professional. The vast majority of advisors do good work and help their clients tremendously. Don’t try to do it yourself for fear of getting scammed by the next Eduardo Diaz.
4. Do your research on the advisor. If they are registered with FINRA or the SEC you can look up their professional history and any blemishes on their record. If they are licensed by the MS Department of Insurance then you can check out their record there as well. With the internet you can do a fair amount of research on their education level or any certifications or designations they have done. None of this is fool proof, but it is a good place to start.