Here are some thoughts on avoiding investment scams and choosing a financial advisor:

1.) First things first -

a) Don't commit to buying anything, especially financial products based on a cold call

b) Do not give personal or financial information to a caller not known personally to you -- if you have some reason to think the request may be legitimate, get a number and call them back

2.) Do your homework -

a.) if you've been contacted by a broker or financial planner who is proposing to sell you something, you can check them out at the NASD Regulation website (www.nasdr.com). This is the organization that regulates stock brokers and it includes a searchable database of firms and individuals. You can confirm first, whether or not the firm exists and/or the individual is currently licensed to sell securities, and you can also view the disciplinary history of that individual (what the NASDR euphemistically calls "reportable events").

b.) to confirm that someone is a Certified Financial Planner licensee, visit the CFP Board of Standards website (www.cfp-board.org).

c.) check out the National Consumer Leagues' "National Fraud Information Center and Internet Fraud Watch" website (www.fraud.org). This site offers information on current scams and tips on how to avoid telemarketing scams and other fraudulent activities.

d.) the Securities and Exchange Commission website (www.sec.gov) also has information on questions you can ask a prospective broker and how to do background checks on brokers or advisors.

e.) the website for the North American Securities Administrators Association (www.nasaa.org) also has useful information for avoiding investment scams (NASAA).

3.) There are no shortcuts -

In reality, investing is something that should be done within the larger framework of a comprehensive financial plan. The best way to make sure that your investments are appropriate and to avoid scams is to put the planning process first.

Choosing an advisor: whether you choose to work with a broker or a financial planner, be prepared to interview at least three potential advisors and take the time to ask questions. Among the questions you should ask are the following:

1. What is your background, including work experience, education and credentials?
2. How are you compensated (fees, commissions, a combination)?
3. Do you work with others like me? What kind of clients/customers do you serve?
4. Will you provide me with client references?
5. What types of reports will you prepare for me and how often will you report?
6. (If the advisor will also be managing your money) Where will my money be held, at a brokerage firm, a bank, which one? Will I receive statements from this custodian?
7. How often will you review my account and/or discuss my personal circumstances with me?

4.) Referrals

You can get a referral to a Certified Financial Planner certificant at the Financial Planning Association of San Francisco website (www.fpasf.org) or, if you are outside the SF Bay Area, by going to the Financial Planning Association's national website (www.fpanet.org).

Dave Yeske

P.S. visit our Rogue's Gallery of Investment Scams