'Trust But Verify' When It Comes to Friendly Advisor Recommendations

We all know how important word of mouth recommendations are to financial advisors (or any business really). In fact, especially for brokers looking to aggressively expand their client base, referrals from current clients are what often drive strong and steady growth. Unfortunately, word of mouth is even more important to scam artists than to legitimate financial professionals.

In many cases, the operators of financial frauds and Ponzi Schemes the world over rely on people who have already been duped to bring in new suckers. Of course, the ones touting the services of a particular fraudster have no idea they’ve not only been deceived, but that they are helping weave an even larger web of deception.

Affinity Fraud Destroys Communities and Trust

Regulators and law enforcement agencies call this approach “affinity fraud.” It’s extremely effective, particularly in tightly knit communities. Churches, support groups, lodges and chapters of social groups, veterans associations — these have all been the target of those working the affinity fraud operation. Even worse, when information reveals that a scam artist is at work in a community, in many cases community members will wait a long time before notifying authorities of what has happened; sometimes they will never do so. That’s because they are more protective of their community than their own financial well-being. Of course, this position will ultimately backfire, since the deeper a scam penetrates into a community, the more vulnerable and weak that community becomes.

‘Trust But Verify’ Word to Mouth Financial Professional Recommendations

So the next time someone on your softball team or in your country club recommends an “incredible investment opportunity” with a financial advisor they’e been using “for years,” don’t just take their word for it. There are numerous resources available to verify the legitimacy of a potential financial professional or investment deal. The best places to start are with the two major regulatory bodies of the securities industry, the SEC and FINRA. Depending on the type of professional behind the opportunity, these agencies both offer deep background information on all registered brokers and investment advisors. Even this small step can prevent massive losses — not the least of which is the loss of our trust and faith in our own community.

PA & NJ Securities Litigation Law Firm

Name *
Name
Phone
Phone

If you or someone you know has been the victim of investment fraud or broker misconduct, please contact our securities attorneys immediately for a free consultation at 215 462 3330 or by using our online contact form.

bestlawyers.jpeg
blf-badge-2017-300x200.jpg