Keeping your money safe in 2023

The subject line of this email may have led you to think this was one of those mind-numbing “market outlook” commentaries attempting to forecast the market….

Instead, let’s address an unfortunate reality: most of us know somebody who has been the victim of a scam. Although scams can affect all strata of economic prosperity, if you’ve managed to accumulate significant assets you are a target. In this month’s newsletter, we’ll provide you with the basics you need to know to reduce the chances of losing your hard-earned money to a scammer.

There are three major categories of scams that high net worth people need to be aware of.

Investment scams

Your friend from the country club tells you about a particular investment that has consistently produced double digit returns. Impressed, you ask to meet with the person responsible for managing this “exclusive” opportunity. During the meeting, you find he or she to be charming and charismatic – but not that forthcoming with information, and a bit elusive when asked direct questions.

Your friend shrugs this off, saying, “He and I have been known each other for years. I can vouch for him – he’s a good guy. You have nothing to worry about.”

Our guidance:

While it’s common for investment professionals to engage socially with their clients and prospects, and something that I myself regularly enjoy, having a “feeling about somebody” doesn’t count as diligence.

In fact, notorious scammers such as Madoff have used social verification and exclusivity as a way to pull the wool over their victim’s eyes.

If you considering investing with someone you met socially, online, or any other way, it’s imperative that you conduct your own research.

  • If an investment advisor, look at their Form ADV or BrokerCheck records and inspect for disclosures
  • The custodian, or safekeeper of the assets they are investing for you, should be an independent, third party – and so should the recordkeeper. If the investment manager has control over these functions, they can easily distort information and/or move the assets without you knowing.
  • Trust your instincts. Anyone who is less than forthcoming when asked a direct question should not be trusted. Even if the person is likeable, there is no good reason that a competent professional should not respond to any reasonable question you may ask.

Emergency scams

You receive a call in the middle of the night from someone claiming to be your grandson, although it doesn’t sound quite like your grandson. He explains he was involved in a bad accident and his mouth is numb from the stitches he received so he may not sound like himself. He called you because you know how much his mother worries about him and he didn’t want to upset her.

The urgent care facility he was taken to won’t accept take his word for it that he has insurance because he left his proof at home. In addition to his facial lacerations, he has also suffered a broken elbow and is in agonizing pain. The doctor is telling him he must have surgery right away or the injury may become permanent. The urgent care facility insists on a $5,000 deposit payment upfront in order to perform this badly needed operation. He’s begging you to send it to them in between moans and groans. He hands the phone to a very professional sounding nurse so she can provide you with the wire transfer instructions.

Does this scenario seem far-fetched? It was recently attempted with one of the families we advise. The scammers involved were so convincing that our client, a sophisticated retired executive, came very close to sending a wire transfer for $5,000. In  his half-asleep mind, the sum of $5,000 was inconsequential compared to the desperate need to provide relief to  his grandson.

Our guidance:

  • Always insist upon third party verification, even if it sounds like it might betray a confidence – call the parent of your grandson and explain what you’ve just been told
  • Ask your relative a question that only they would know, like the name of their beloved first dog – that sort of information is unlikely to be found by internet searches
  • No reputable emergency health service provider would deny treatment to someone badly injured in an accident because they didn’t carry roof of insurance with them

Inheritance scams

With the prevalence of information available over the Internet, inheritance scammers have gotten more convincing. Picture a scenario in which you receive a letter from what appears to be a legitimate attorney in a state where some of your relatives reside.

The letter claims that a distant relative has died, leaving you a large sum of money. It’s surprising, but not out of the question – you and this long-long relative hadn’t spoken in a while. It’s written on professional letterhead, and how did they manage to find your address?

You verify the law firm’s information online, and it turns out the attorney is in fact a practitioner and the firm does exist. All of the details seem to line up. It seems uncanny, though, that a distant relative would leave you an inheritance without somebody else in your family contacting you first. Should you be skeptical?

Yes – because it is most likely a scammer who got your personal information from a family tree directory or some other public website that collects your information.

Our guidance:

  • Don’t respond. Inheritance scammers are looking to get their hands on your personal information such as phone, email, and eventually bank account details.
  • Never click an email from an address you do not recognize
  • Install spam filters on your phone and email
  • Register yourself with the Do Not Call Registry in order to limit the number of people who have your phone number
  • If you believe this inquiry may actually be true, do not handle it yourself. Consult with your attorney or financial advisor and do not take action unless a professional has conducted the necessary research on your behalf.

See a pattern?

Scams on high net worth people are effective when they operate through the realm of the familiar. A social contact, someone posing as your grandchild, or the name of an attorney who seems legitimate.

Familiarity is what leads us to let our guard down. While it’s no fun to be suspicious as a matter of course, we advise you to operate with an attitude of healthy skepticism. Keep your guard up and question in a polite and respectful manner – and make sure you get a good answer. If you don’t, you have every right to flee the situation.

Follow our tips but know that these are only a starting point. If you ever find yourself in these situations, information is your best ally and you should draw upon all available resources instead of moving forward alone.

As a general rule, anyone who responds negatively to a request for information should trigger a red flag – no matter how familiar or safe they may seem.

And on that sober note, we encourage you to contact us if you have any questions or would like to meet.

-Andy, Patty, and the team


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