According to a recently unsealed U.S. Securities and Exchange Commission lawsuit in Dallas federal court, former New York Jets quarterback Mark Sanchez, and Major League Baseball pitchers Jake Peavy and Roy Oswalt, were defrauded out of about $30 million from broker Ash Narayan, formerly of RGT Capital Management.
“I think some athletes (like most people) are susceptible to investment scams because often they don’t have the time to conduct the required due diligence when presented with an opportunity,” says Frank Paré, CFP® president of PF Wealth Management Group, LLC.
“This is particularly true when the athlete wants to believe that the investment promises being made are true and that the person making them is trustworthy,” he adds.
BE.com discussed with Paré how it’s not just athletes who can fall prey to unscrupulous advisors. He shared tips and insights as to how we can all protect ourselves.
BE.com: The average person hears stories like these and doesn’t think they are ‘rich enough’ to be scammed, what are your thoughts on that?
Paré: I don’t believe that to be true, because anyone; irrespective of their bank account size, can be the victim of a scam. You might recall some of Bernie Madoff’s victims included individuals who were not millionaires, as well as non-profit organizations.
What are some things people can do to protect themselves from fraudulent advisors?
Start with a financial plan that clearly spells out your goals and how working with your advisor will help you achieve your goals. Make sure the advisor clearly explains the investments being offered, including the risks and potential losses; this will help avoid chasing too-good-to-be-true investments.
Always open your mail (i.e. account statements), because you want to know if your investments are performing.
Get a 2nd opinion from another advisor. Similar to visiting a doctor who tells you that you might need to undergo surgery, having a 2nd opinion might save a lot of money and headache.
Finally, the internet has a lot of due diligence information that might help in determining if the advisor you’re thinking of working with has history. A final note of caution I want to emphasize is that despite one’s best efforts, it is not always a guarantee against someone with strong intentions to commit a scam or fraud.
What can someone do once they realize they’ve been in an investment scam?
Report it to law enforcement and the regulatory agencies right away. In addition, they should inform the firm’s compliance officer if it is a large or mid-sized firm. While it may be difficult to admit, the point is don’t remain silent. There might be very little that can be done to retrieve the money once its been stolen as a result of a scam, but it is important to tell everyone just in case the individual is still conducting it.