We are in an unusual period for the financial markets. Global uncertainty and rapid technological change have spurred a proliferation of potentially risky investments, including a tidal wave of cryptocurrencies, pandemic-related schemes, “hot stocks,” and more sinister fraudulent vehicles to watch out for.
When entrusting your financial future to any institution, it is wise to do the critical thinking and research that can empower you with confidence around your decisions and your long-term investing strategy. “Most RIA’s are no better than the clients that are using them and paying them to allocate their resources because they don’t have more discipline than the client does,” said Mark Matson, Founder and CEO of Matson Money. That is why, at Matson Money, we coach investors to be vigilant when it comes to their financial futures. We believe that to be prudent and disciplined in your investing strategy, investors should always verify, then trust.
It is also important to know that individual intelligence or success does not insulate anyone from investing schemes and scams. Highly educated people have fallen prey to some of the most outrageous cons out there. The simple fact: investment fraud and scams can be sophisticated and are designed to appeal to our most basic desires as an investor.
“In my time at the U.S. Securities and Exchange Commission, if you gathered together all the Ph.Ds, MBAs, DDS, CPAs, attorneys and other college graduates we talked to who had lost six figures to a scam, you could not stuff them all into Ted Turner’s biggest house,” said Pat Huddleston of the U.S. Securities and Exchange Commission.1
Becoming the Vigilant Investor
It begins with understanding that all healthy humans can be vulnerable to investor fraud. When you become aware that you might have investing biases and can compensate for them, investors can look out to protect themselves from schemes. Many dangerous scams look perfectly legitimate from the outside and balance on the line of never sounding too good to be true.
The Securities Exchange Commission’s Office of Investor Education and Advocacy recently warned investors of potential red flags such as aggressive sellers, “risk-free” investments, and over-the-top pitches to appeal to investors.2 They encourage investors to defend themselves by asking questions, doing thorough research, and getting to know your financial advisor – and verifying their credentials – before making any decision that could affect your financial future.2
What Else Can Investors Do?
Strict and unwavering adherence to empirically tested academic investing principles is a critical long-term practice that can grow and protect your wealth over a lifetime. In addition, it is important to know these four pieces of information about any potential investment provider.
Third-Party Custody: An independent third-party custodian can provide an important measure of protection in which your investment manager never handles deposits, or withdrawals directly. This means your money is safeguarded where only you can access it, shielding you against potential mismanagement and fraud.
Financial Statements: Audited financial statements can help you verify that a potential investment provider is stable and viable.
Standardized (GIPS) Audited Returns: Global Investment Performance Standards (GIPS) is the benchmark reporting system in the investing industry. GIPS audited returns can show you how a potential investment provider has performed historically. But many financial firms are unable or unwilling to provide this information — which may be a significant red flag to an investor.
Fines and Penalties: Before investing your money with an organization, it is important to know if they have been fined or penalized by the Securities and Exchange Commission (SEC) for violating laws or regulations put in place to protect investors. In over 30 years in business, not a single fine or penalty has been issued to Matson Money.
At Matson Money, these critical pieces of information are made available to clients through their advisor coach. It is our mission to save the investor and save the world by equipping investors with the coaching and education to empower them to make prudent decisions around their investing strategy and financial future. Aligned with that is our commitment to the fiduciary standard: In all circumstances, we strive to put the needs of our investors above all other considerations.
If you want to learn more about Matson Money, email us at connect@matsonmoney.com to see how learning about empirically tested academic investing science can help transform your investing experience.
Disclosures:
This content is not to be considered investment advice and is not to be relied upon as the basis for entering into any transaction or advisory relationship or making any investment decision. This content is based on the views of Matson Money, Inc. This content includes the opinions, beliefs, or viewpoints of Matson Money and its Co-Advisors. Other financial organizations may analyze investments and take a different approach to investing than that of Matson Money. All investing involves risks and costs. No investment strategy (including asset allocation and diversification strategies) can ensure peace of mind, guarantee profit, or protect against loss.
1, Huddleson, Pat. The Vigilant Investor. AMACOM Publishing. 2012. Print.
2. Red Flags of Investment Fraud Checklist. U.S. Securities and Exchange Commission. Retrieved 11 July 2022 from https://www.investor.gov/protect-your-investments/fraud/how-avoid-fraud/red-flags-investment-fraud-checklist