Heads Up: Fake financial professionals

By Jason Scuglik

The widespread use of social media and the rise of AI tools have enabled more scammers to impersonate legitimate businesses and financial celebrities. Such impersonations exploit the trust earned by credible entities to try luring investors into risky, illegitimate or even non-existent opportunities.

In a recent podcast uncovering 2024 trends in fraud and scams, the Financial Industry Regulatory Authority (FINRA) noted the prevalence of unlicensed individuals promoting unregulated investments. Likewise, the FBI and the Securities and Exchange Commission issued a joint investor alert to investment impostors.

Red flags to watch for

1. Performance guarantees or suspiciously consistent returns – Remember that all investments carry some level of risk. Risk is an inherent part of what investors are compensated for.
2. Unsolicited offers or advice – Resist the urge to respond to junk emails, unexpected phone calls or random messages, as they are likely illegitimate.
3. Missing documentation – Be cautious of investment opportunities that lack proper information, such as a prospectus or offering circular, as this could indicate an unregistered security.
4. High-pressure sales tactics – Reputable investment professionals will not rush you into decisions or pressure you into investments you are uncomfortable with.

Tips for protecting yourself

Be cautious and take the time to research firms or individuals claiming to be investment professionals. If an opportunity appeals to you, avoid relying on contact information provided by the promoter. A little due diligence can save significant headaches later. Here are some steps to help you navigate the noise:

1. Independently verify companies or individuals – Conduct your own research instead of relying on information provided by the source, as it can be easily fabricated.
2. Use FINRA BrokerCheck – All registered firms and individuals are listed on FINRA’s website. BrokerCheck can provide details about the firm’s credentials, licenses, and any disclosures that may be relevant. Here is my BrokerCheck page
3. Understand the investment – A financial professional should be able to clearly explain the risks involved and how the investment generates returns.
4. Be skeptical of reviews and testimonials – Paid or fake reviews are not uncommon, so take them with a grain of salt.
5. Don’t let emotions drive decisions – Fear of missing out (FOMO) can be a powerful motivator, but it is crucial to carefully evaluate opportunities to ensure they align with your financial situation and goals.

Final thoughts

You’ve worked hard to build your wealth, so it’s worth investing a little time and effort to ensure that the trust you place in a firm or financial professional is well-founded. Investing can be incredibly rewarding when approached correctly and with your financial situation, risk tolerance, and objectives in mind.

Jason Scuglik is information systems administrator at Landaas & Company, LLC.

(Heads Up is an occasional alert on consumer and investment scams.)