MYTH: I Can Trust Licensed Fiduciaries With My Money

In general, yes, you can trust a fiduciary adviser with your money.  But why would you??

Weekly, in the many financial journals I read, are one or more news stories about “financial advisers” who have outright stolen their clients’ money.  Here’s an especially egregious one involving the elderly:

And this one involving twin brothers who stole $5 mil. from friends, family and others:

These crooks all seem to spend their ill gotten gains on the same trinkets.  This pair spent $68,000 on handbags.  $58,000 on watches.  $30,000 on  a “matchmaking” service.  Wow.  They must really have needed some help.  Or it was one of those not-so-legal matchmakers.

I could go on and on.  No wonder you don’t trust us!  But out of the over 1.0 million registered advisers in the USA,about 76,000 have financial misconduct disclosures on their records, or about 1 in 13.  When I researched this I expected a much smaller number, and was prepared to say that it was a “tiny minority of bad apples” that are rotting the entire industry.  76,000 isn’t tiny by any stretch.  One out of every thirteen!

So you must take responsibility.  How?  Here’s a To Do list:

  • Avoid firms with high percentages of misconduct (Oppenheimer was acquired by Invesco):
  • Avoid doing business in states with high misconduct rates
  • MOST IMPORTANT:  Don’t give money to your adviser unless it is for a contractually agreed upon financial planning fee.  Personally, I don’t want to be anywhere near your money.  Large accounts such as 401(k)s & brokerage accounts should be sent directly to, and held by, an independent custodian, not your adviser nor their firm.  And the custodian should be easily vetted online.
  • Don’t accept statements compiled and issued by your adviser nor their firm(s).  This rule alone would have prevented the Bernie Madoff fraud. 
  • Be suspicious of claims of outlandish returns.  Greed and fear of missing out (FOMO) are the worst investor motivators.  Focus instead on your written financial plan and the necessary elements to make it successful.  If your plan needs 20% rates of return to succeed then it is a lousy plan.
  • Check with your state regulators before investing in any security or insurance product.  They must be approved by your state before they can be offered for sale.  Even I was tempted by Woodbridge Group’s pitch.  But check with the Oregon Dept of Financial regulation revealed it was not approved.

    Just remember that statistic: One in Thirteen.

Best always,

Gary Duell

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