2008 and 2009 will be remembered for bear markets, a global credit crunch and some of the largest investment scams ever. But these scams are nothing new; from Charles Ponzi to Bernard Madoff to Sir R. Allen Stanford, they've been repeated throughout history, and there will certainly be more to come in the future. But the good news is fraudsters often follow the same basic playbook. Learn the playbook and know how to ask the right questions and financial fraud can be easy to detect and avoid. Sometimes the return of your money is simply a lot more important than the return on your money!
"Fisher is a superb story-teller. He is very clear about his five signs of financial fraud. Each sign is supported with historical accounts of how innocent people were scammed by financial advisers they knew and trusted. It is unfortunate that many of these situations occurred very recently. The caveat “buyer beware” is relevant to the investment world as much as it is to shopping for any new product or service." Journal of Financial Counseling and Planning
"The book is most useful to people who has a need to trust their money with professional money managers, but it can benefit anyone because the book imparts some basic and useful financial knowledge in an easy and interesting way that it helps one set the right expectation for investment." Seeking Alpha
"With five straightforward rules that would have saved any investor from Bernie Madoff, investment firm CEO and Forbes columnist Fisher (100 Minds That Made the Market) gives readers a secure plan for fraud-proof investing, worthwhile for novices and sophisticated financiers alike." Publishers Weekly
In 2007, when the world was staring into the teeth of the biggest economic catastrophe in three generations, very few economists had any idea there was any trouble lurking on the horizon. Three years into the mess, economists now offer remedies that strike most people as frankly ridiculous. We are told
In recent years, corporations of all sizes and orientations have become more sensitive to social issues and stakeholder concerns, and they are collectively striving to become better corporate citizens (in some cases, urged on by shareholder pressure or government regulations). The best practices in corporate sustainability are no longer the exclusive
Incentives are the cornerstone of modern life. And understanding them or ferreting them out is the key to solving just about any riddle. It isn't just the boldface names inside-trading CEOs and pill-popping ballplayers and perk-abusing politicians¾who cheat. It is the waitress who pockets her tips instead of pooling them. It
On the heels of the Enron trial, there are many lessons to be learned from the barrage of fraud hammering corporate America -- including how to spot signs of future impropriety. In a gripping and intriguing read, BUSINESS FAIRY TALES uses real-world scandals to illustrate the top twenty most common methods
Arresting every fraudster and punishing him are very expensive and require a lot of unavailable human and financial resources. The damaging effects of fraud would not be reversed, nor would lost assets or reputations be restored when fraud is discovered. It is economically more feasible to prevent fraud than to detect
The good news is fraudsters often follow the same basic playbook. Learn the playbook and know how to ask the right questions and financial fraud can be easy to detect and avoid.
An age-old Western saying related to how to keep people from stealing things from your wide open spaces is: "Good fences make good neighbors".
History's biggest cases have one thing in common: the money manager or financial adviser also acts as the bank, broker or dealer—holding and supposedly safekeeping the assets he/she manages. Clients didn't deposit the money with a third party; they deposited the money directly with the decision maker.
The most legendary investors of all time have only been right about 70% of the time. Investing is a probabilities activity not a certainties activity, and being wrong 30% of the time is a perfectly marvelous success rate.
Above-average returns in the long term come with individual years that stink. And you need to accept that because it is in seeing the stinking years that you know a manager is actually honest.
Fraudsters claim not just fake returns, but fake returns that are consistently high, positive and better than what you could get normally from markets—no matter what stocks, bonds or other principle securities do.
If you see performance claims not followed by sufficient disclosures, something is likely afoot. The disclosures are there to detail how the returns were measured and calculated.
With the benchmark and the performance history, you can measure whether an adviser does a consistently good job or not. You want them to perform close to the benchmark, most of the time - that's a sign of an adviser doing a good job.
A non-rat adviser will never hesitate to openly discuss strategy; because a good strategy should be straightforward. If your adviser doesn’t or can’t explain the strategy more simply, be suspicious this is a common rat tactic.
It is central to all con artists that you not understand, because if you did, you would never give them your money.
Maybe your adviser is dully registered to both render advice and custody assets, and you think they have good reason for it. All wrong! If these are part of the sales pitch - sold to you somehow as benefits - be suspicious.
A good reputation may be ill got, and a poor reputation might be unfair. Either way, don't be too impressed with a sterling reputation or swayed by name calling—neither tells you anything about what someone actually has done or will do.
Laws and regulations don't eliminate bad behavior. Only you can protect you. The truth is, as Ben Franklin said, "God helps those who help themselves."
Con artists know folks are likely to trust referrals from friends and are very good at working that angle. While fine for finding a mechanic or baby sitter, this is a grave mistake when it comes to investing.
If you hire a rat who successfully embezzles, you may never see a dime of your money again. Knowing the signs of financial fraud is your ultimate defense against hiring a rat.
Building new knowledge of how capital markets works is everyone's job, whether you accept that or not. You are part of it, whether you know it or not. By knowingly embracing it you can know things others don'tthings finance professionals don't know yet. You needn't be a finance professor or have