How Investors Can Avoid Getting Fooled: 5 Tips From FINRA

WASHINGTON–(BUSINESS WIRE)–On the eve of April Fools’ Day – which also happens to be the first day
of Financial Literacy Month – the Financial Industry Regulatory
Authority (FINRA) offers five tips to help investors avoid being tricked
out of their money.

“April 1^st is a day to indulge in silly hoaxes and pranks.
But there’s nothing funny about a fraudster carrying out a scam – and no
one will yell ‘April Fools’ to make the harm melt away,” said Gerri
Walsh, Senior VP of Investor Education at FINRA. “So instead of offering
practical jokes, we’re marking the start of Financial Literacy Month
with practical tips for becoming a smarter investor.”

1. Know
   with whom you’re dealing. When choosing a financial
   advisor, consider your financial needs and goals, and what types of
   people or firms you could work with. Ask people you know for names of
   professionals they’ve used, but don’t stop there – interview a
   selection of candidates. Ask lots of questions: have they worked with
   people like you; verify their background; how are they compensated and
   what fees and expenses they charge. Always work with registered firms
   and individuals, and check employment and regulatory histories. You
   can do that quickly, easily and at no charge with BrokerCheck®.
2. Understand
   how to work with your advisor. Be clear and honest about your
   investment goals and the amount of risk you are comfortable taking.
   Learn about any investment before you make it. And remember: it’s not
   enough to read the sales material or offering documents. Make sure you
   truly understand the investment or strategy by asking lots of
   questions about potential risks and rewards—and how the investment
   will help you achieve your goals. Keep a vigilant eye on your account,
   including fees, account statements and transaction confirmations. Be
   wary of sales pitches that make exaggerated claims about performance
   or predictability.
3. Know
   the different types of investments. Think of the various types
   of investments as tools that can help you achieve your financial
   goals. Each has its own set of features, costs, liquidity, risk
   factors and purpose. And so you should ask questions about all of
   these elements—and also consider which mix of investments can best
   help you achieve your goals. To do this, make sure you are at least
   generally familiar with bank products, bonds, stocks, investment funds
   and products for specific purposes like saving for college or
   retirement. Never approve a purchase an investment or sign a contract
   without fully reading and understanding everything about the product.
4. Look
   for the warning signs of fraud. Look out for guarantees,
   unregistered products, overly consistent returns, complex strategies,
   missing documentation, account discrepancies and push salespeople. The
   vast majority of advisors are trustworthy, but there are still others
   who will seek
   to take advantage of your trust. Practice spotting the persuasion
   tactics that con artists use, and always exercise healthy skepticism.
5. Don’t hesitate to ask questions. If that’s not already clear
   from the tips above, remember this: it’s your money, why shouldn’t you
   feel completely comfortable about trying to protect it? Never worry
   about appearing uninformed, and remember there are no stupid
   questions: how does this product work, how can it go wrong, is there a
   cap on the return, is it a registered product, can I sell it quickly
   and easily, how are is the seller compensated, etc. If your questions
   are not answered to your satisfaction, then your response is clear:
   tell them, “no” – you’re no fool in April or any other time of year.

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Investors can obtain more information about, and the disciplinary record
of, any FINRA-registered broker or brokerage firm by using FINRA’s
BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2015,
members of the public used this service to conduct 71 million reviews of
broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or
by calling (800) 289-9999. Investors may find copies of this
disciplinary action as well as other disciplinary documents in FINRA’s
Disciplinary Actions Online database. Investors can also call FINRA’s
Securities Helpline for Seniors at (844) 57-HELPS for
assistance or to raise concerns about issues they have with their
brokerage accounts and investments.

FINRA, the Financial Industry Regulatory Authority, is the largest
independent regulator for all securities firms doing business in the
United States. FINRA is dedicated to investor protection and market
integrity through effective and efficient regulation and complementary
compliance and technology-based services. FINRA touches virtually every
aspect of the securities business – from registering and educating all
industry participants to examining securities firms, writing rules,
enforcing those rules and the federal securities laws, and informing and
educating the investing public. In addition, FINRA provides surveillance
and other regulatory services for equities and options markets, as well
as trade reporting and other industry utilities. FINRA also administers
the largest dispute resolution forum for investors and firms. For more
information, please visit www.finra.org.

Contacts

Financial Industry Regulatory Authority (FINRA)
Ray
Pellecchia, 212-858-4387