Broker Check

Your Defenses Against Fraud and a Look Back at 2016 and What May Be Ahead.

January 07, 2017

On guard against fraud

Fraud is a reality that we must constantly guard ourselves against. There are those who can be considered trusted advisors and there are those who will always be unscrupulous. We know and understand that. Yet, by nature, many of us want to trust and open up to the friendly and seemingly knowledgeable folks we meet. It's always important to exercise a reasonable amount of caution.

Seniors can be particularly susceptible to abuse. Many want to trust those that seem willing to provide assistance, and the proliferation of complex products can leave us open to fraud by those exploiting that complexity.

I have seen or heard too many heart-wrenching stories of outright fraud, or financial products that were sold to an individual that simply didn’t make sense, except for the dishonest person peddling their wares.

Never hesitate to reach out to my office if you ever have any questions about my recommendations or why I believe they are best for your particular situation. Or for that matter, call me if you’ve come across something else and just don’t think you know enough about the product to ask the right questions. I am here to assist you in any way that I can.

10 ways to beef up your defensive line

Reviewed by the Federal Citizen Information Center and the U.S. General Services Administration, the Certified Financial Planner Board has put together this list of steps, which you can implement immediately to alert you to potential fraud red flags and help protect you.

1. Look beyond the designations on a business card

There are over 170 known designations and certifications used by financial professionals. Some require rigorous education and testing like the Certified Financial Planner™. Others are little more than marketing tools, with no real education needed—much less an exam.

2. If you don’t understand what is being said, don’t buy it.

This one is pretty simple, but we can still fall victim to promises that are really too good to be true. I strive to keep an open line of communications with you. Always feel free to pick up the phone and call me if you come across something that sounds good on the surface but leaves you with an uneasy feeling.

3. There’s no such thing as a free lunch.

You may get a tasty meal, but be wary of the pressure to make an immediate buying decision. There’s nothing wrong with sleeping on it or getting a second opinion.

4. Just because a so-called expert recommends it doesn’t mean it’s right for you.

I have repeatedly emphasized that your specific situation and circumstances dictate the best course. Think about it–an aggressive stock fund might be just what’s needed for a 28-year-old who is saving for retirement. That same fund might not work for someone who is 90 years old and needs income.

5. It’s a tried and true axiom. If it sounds too good to be true, it’s probably not legitimate or safe.

It’s human nature to want to find the magic bullet that easily solves a problem. But be very wary of promises that seem too good to be true.

6. Don’t confuse familiarity with trust.

We know plenty of good people in our community, but please do your homework and check anyone out before entrusting your finances to them.

7. The final sign-off should always be yours.

Don’t leave spaces in account applications or contracts before signing them.

8. Make sure the money others are making isn’t yours.

We’ve all heard of the classic Ponzi scheme. Be very careful that you don’t throw your hard-earned money into a scam.  As I stated in Step 5, "be very wary of promises that seem too good to be true."

9. Get the full story.

What is the cost of the investment? Who will benefit from your decision? Is it you or the person making the recommendation?

10. You have rights as a homeowner. Know them.

Know your rights as a homeowner. If you are considering tapping equity via a reverse mortgage, let’s talk and discuss the benefits and any possible pitfalls.

These crimes are all too common today—please take these steps to heart and protect yourself.

The year in review and what might be ahead

2016 has come and gone. It started out in a very rocky fashion, with comparisons to 2008 that were too numerous to count.

Let’s be clear. As I’ve emphasized in past summaries, markets don’t always trade in a quiet and orderly fashion. But, just because we run into turbulence doesn’t mean it’s time to retreat into cash. Volatility has been and always will be part of the investment landscape. It’s how we manage and mitigate risk that is critical.

I’ve talked about the hazards of timing the market in the past. So here is another way to look at it. In order to successfully time the market, you have to be right twice–getting out near the top and getting back in somewhere near the bottom.

There isn’t anyone who can accomplish such a feat and do it consistently.

Case in point. While researching this month’s summary, I ran across an article published by CNN Money that offered up an opinion by what it called an “investment guru.” He is well-respected in the industry, and his opinions hold weight with many investors.

Published January 28 amid heavy turmoil, he called cash “the most underappreciated asset,” and advised investors to hold 25-30% of their wealth in cash.

This, he said, will give you "[a]gility . . . resilience . . . and many opportunities to buy really good names at beaten down prices.” Well, just two weeks later, the S&P 500 Index bottomed out (St. Louis Federal Reserve).

Besides the pitfalls of trying to time stocks, that kind of advice must depend on many different factors that are specific to an individual or couple’s unique circumstances.

While his ideas were well-intended, it goes against the grain of what we preach and how we approach financial planning.

We have just entered 2017 and markets are calm and near highs. That follows a year when the S&P 500 Index rose by 12%, including reinvested dividends, according to Morningstar. In fact, it’s the sixth year in eight that the closely watched index of large-company stocks rose by more than 10%.

Going forward, there is one thing I can promise you—we will run into another round of volatility.

But I am here for you. If you see something in print or on the Internet that causes you concern, please don’t hesitate to reach out to my office. I am happy to answer any questions or address any concerns you have.

Table 1: Key Index Returns




3-year* %

Dow Jones Industrial Average




NASDAQ Composite




S&P 500 Index




MSCI World ex-USA**




MSCI Emerging Markets**




Source: Wall Street Journal,

MTD returns: Nov. 30, 2016—Dec. 30, 2016

YTD returns: Dec. 31, 2015—Dec. 30, 2016


**in US dollars

Looking ahead

The year is starting in an upbeat fashion. The economy is moving ahead at a modest pace, interest rates remain low, and odds of a recession are low.

Moreover, Thomson Reuters forecasts S&P 500 profit growth of 12.5% this year, and consumer and small business confidence is up sharply in wake of the election (Conference Board, National Federation of Independent Business).

However, the economic skies never fully clear, and I am always monitoring the landscape.

For starters, the forecast for corporate profits is predicated, among other things, on continued economic growth.

The late-year optimism that pushed the major indexes to new highs was aided by optimism that tax reform, regulatory relief, and infrastructure spending are on their way.

But what shape will tax reform and new spending take? Compromises will be needed and major new spending, if it passes the Republican Congress, could have huge lead times.

One thing that has been certain–Donald Trump has toned down his anti-free-trade rhetoric, alleviating some worries among investors.

Of course, all of his tough talk on trade may just be bluster, as he hopes to strike tough new trade deals.

But what if a miscalculation sparks a trade war? We learned from the 1930s that a breakdown in global trade has serious consequences. The infamous Smoot-Hawley Tariff Act passed as the Great Depression was getting under way, erecting new barriers to imports. Unfortunately, it was met by retaliation, and the trade war that enveloped the world worsened the Depression.

In no way am I forecasting a downturn of that magnitude, but instability among the nation’s key trading partners would likely create unwanted volatility.

That said, problems abroad that have not had a material impact on the U.S. economy have created temporary angst, slowing but not ending the current bull market. The evidence reveals that over the past 50 years, bear markets have been primarily associated with recessions (St. Louis Federal Reserve, NBER data).

A new recession and bear market are inevitable, as is an eventual economic recovery and new bull market. While changes to your personal situation may cause us to revisit your investment plan, a disciplined approach has historically borne the greatest dividends.

I hope you’ve found this review to be informative.

If you have any questions or would like to discuss any matters, please feel free to give my office a call.