A lot of the advice in Financial Serial Killers falls under “if it looks too good to be true” category. As an example, the book cites Bernie Madoff, who generated annual returns that closely resembled each other even as the overall market was going down. Attorney Tom Ajamie says it’s best to steer clear of making decisions based on “gut feeling.”
“Which I know sounds kind of counter-intuitive, but you’ll see it in a lot of the stories where people got scammed or ripped off. They did it based on just a personal relationship alone: ‘Hey, I know this guy because his kids go to school or my kids go to school.’ So we’d say, look, here are some objective factors, and then yes, once you’ve narrowed down your pool there has to be some chemistry, as you say. Scamsters in the financial world are extremely complex people and they’re very skilled at creating a sense of bonding that in the end if phoney.”
There are questions to ask yourself. Is your broker pressuring you at an emotional time, such as after the loss of a spouse who handled the money? Is your adviser guaranteeing a return of ten percent or higher? Are you being asked to make an investment transaction that hinges upon selling your home or taking out a mortgage?
“The goal was really to help the average person who’s maybe got $40,000 in savings or $6,000 in savings or maybe $100,000 in savings, maybe frustrated and concerned in the current economic environment. These seen these accounts go down, they’ve read terrible stories about Madoff people losing all their money, you know, Stanford people losing all their money, and they want to take proactive steps to try to protect their savings and make sure they’re in the right hands, and that was really the target audience.”
Ajamie says emotional urges can lead to bad investment decisions. And when people lose money, they’re in a hurry to win it back, making them vulnerable to get-rich schemes. Ed Mayberry, KUHF News.