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How to Avoid Getting Caught Up in Financial Fraud  Thumbnail

How to Avoid Getting Caught Up in Financial Fraud

If you go back and skim the 200-plus episodes we've recorded of Keen on Retirement, you'll notice that every year or so, we devote an episode to the latest financial frauds and scams that are making the rounds. Especially as we head into tax season, it's important that folks remember the IRS, the Centers for Medicare and Medicaid Services, and the Social Security Administration are never, ever going to call you and ask for your banking info. We also regularly caution folks against clicking on suspicious emails or text message links, or making investments that seem too good to be true with the Bernie Madoffs of the world.  

On today's show, we talk about another type of financial "fraud" that's perfectly legal but potentially just as dangerous to your financial security: taking bad advice from unaccredited financial commentators and celebrities trying to further their own best interests, not yours.


Credentials matter.

Broadly speaking, financial professionals operate under one of two standards. Brokers and advisors who use the suitability standard are only required to make financial recommendations that are "suitable" to clients. Less scrupulous folks who are giving "suitable" advice might push products and services that pay them the highest commissions rather than the products or services that are in their clients' best interests.

At Keen Wealth, we adhere to the fiduciary standard, from the Latin "fidere," meaning, "to trust." Fiduciary advisors are required -- by law -- to put their clients' best interests ahead of their own.

And the folks you see on cable news and social media, predicting the collapse of our financial system or explaining how to become a billionaire overnight?

They're typically not operating under any financial standard at all! You'll also notice that, by and large, these folks haven't earned professional designations like Certified Financial Planner (CFP®), Chartered Retirement Planning Counselor (CRPC®), or Certified Public Accountant (CPA).

What they're doing is selling: books, newsletter subscriptions, or tickets to their next seminar. And you don't have to be a fiduciary to go on CNBC and sell a book, even if that book is about finance.

Yes, some of these people are very wealthy. But it's doubtful that any of them got rich by following the financial prescriptions they're peddling. They got rich selling stuff. And while there may be a few kernels of quality advice in their content, it can be very difficult for the non-professional to separate good ideas from bad ideas.

Stay in your lane!

Take Dave Ramsey, for example. He's helped millions of people get out of debt by promoting some common-sense best practices: control and pay down your debt, live within your means, save and invest early. That's good advice whether you're hearing it from a talk show host or your mom.

But last year, Ramsey veered out of his lane when he started encouraging his audience to invest more in stock mutual funds, arguing that they return 12% per year. This simply isn't true. And following Ramsey's logic to its conclusion -- that retirees could withdraw as much as 8-10% from their accounts every year -- could cause serious and irreparable harm to a retirement plan. Ramsey got more clicks, views, and publicity for his comments. I doubt anyone who took his advice improved their financial prospects.

Robert Kiyosaki is another example. His book "Rich Dad, Poor Dad" also brought common sense financial ideas to a wide audience. But that was almost 30 years ago. These days Kiyosaki makes over-the-top predictions that make for entertaining TV but never pan out.

Lately, you might have been reading about how to "invest like a billionaire." These folks are promoting private equity investments, meaning investment in companies that aren't publicly traded. These kinds of investments can take several different forms, including a direct purchase of shares from company owners or investing in things like hedge funds or private equity.  

Private equity investment is not new, and it's true that many of the wealthiest wealthy people do include these kinds of investments in their portfolios. Of course, those folks also typically won't be ruined if a fund or company they invest in goes bust, which does happen. Billionaires also, typically, aren't bothered by how illiquid private equity investments are, which could be another challenge for the average investor who might need access to cash in a pinch. And in my experience, the “private equity” type investments that are being offered to the general public have likely been severely watered down.

What's even more troubling is that some of these private equity enthusiasts are making a very specific pitch. They don't want you to invest in just any fund; they want you to invest in a fund they themselves created! Again, there's nothing illegal about that, and the small print at the bottom of the screen or at the end of the book generally makes adequate disclosures. But the fiduciary standard and all the other regulations around public investments exist to protect your money from these kinds of conflicts of interest.

If a charismatic celebrity motivated you to get healthy, start your own business, or pay down your credit cards, that's great. But that doesn't mean you should trust that same celebrity to manage your retirement plan.

Work hard and plan for the long run. 

I know our comprehensive financial planning at Keen Wealth probably doesn't sound as flashy or exciting as "Become a billionaire in five easy steps!" But unlike advice from these various characters, you can trust our process to put your interests first and help you achieve your financial goals. The wonderful folks we work with are salt-of-the-earth types who are achieving financial independence the old-fashioned way. They've worked hard their entire lives. They've committed to their plan. And as they transition into retirement, that plan gives them the resources and the confidence they need to start a fulfilling new chapter of their lives.

Do you have any questions about financial advice you’re seeing on cable TV or social media? Get in touch with Keen Wealth and we’d be happy to schedule a face-to-face meeting or answer your question on a future episode.



About Bill

Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

The Amazon Best Seller ranking listed on marketing materials is specifically referring to Best Seller rankings for the Kindle Top 100 Paid Lists under the subcategories of: Budgeting and Financial Risk Management, based on data as of September 5, 2019 and the second edition under Financial Risk Management on October 26, 2022. Amazon rankings although relevant on how a product is selling overall doesn’t necessarily indicate how well an item is selling among other similar items or similar item categories. Amazon may choose the most popular categories or subcategories within which an item has a high ranking to determine its best seller rankings. These rankings are updated hourly and as a result, should be expected to fluctuate as such. Keen Wealth Advisors and Amazon are not affiliated entities. 

The Steve Sanduski Advisor Network, Belay Advisor, LLC and other third-party contributors to our blogs and podcasts are not affiliated with Keen Wealth Advisors.

For additional details on Keen Wealth Advisors, please visit https://www.keenwealthadvisors.com/important-disclosures.

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