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Investment scams target busy physicians


Many doctors would like to manage their own investments but lack the time, energy or expertise to do so. Instead, often they seek out an investment adviser they think they can trust to handle their money.

Key Points

Many doctors would like to manage their own investments but lack the time, energy, or expertise to do so. Instead, often they seek out an investment adviser they think they can trust to handle their money.

Unfortunately, as high earners and busy professionals, doctors also make inviting targets for con artists. Such fraudsters, often called "financial serial killers," typically target a group whose members share a profession or ties to an institution such as a religious or fraternal organization.


Such activity is known as "affinity fraud." After the revelation that Bernard Madoff stole as much as $65 billion from mostly Jewish individuals and organizations, dozens of similar affinity frauds came to light.

The amount of wealth wiped out as a result of fraud is staggering. In 2010 alone, 42 convicted or alleged fraud artists and Ponzi schemers were sent to jail or charged in crimes involving $8.64 billion in investor money, according to industry publication InvestmentNews' database that tracks financial fraud.


So what steps can doctors-or any investors-take to protect themselves from con artists?

• Never invest money in a deal or product with a so-called "guaranteed return" of 10%, 15%, or higher. Returns of that magnitude are impossible to create year after year, particularly with interest rates close to zero. Also, markets are constantly fluctuating, so even the best money managers in the world will have down years. A money manager boasting of "guaranteed double-digit returns" is really screaming "scam."

• Put your money in a separate account, away from advisers and brokers. If you aren't getting separate statements from a custodian bank, something may be amiss. Also, make sure that you have 24-hour online access to your custodial account. If a broker or adviser says that it's impossible to provide such access, it's likely he is scamming you.

• Be wary of hiring someone from your community, workplace, or place of worship. This is a complex issue and sounds counterintuitive. But financial con artists manipulate the emotional ties and trust that are fundamental to families and affinity groups. They know that we are all more likely to trust people who share our religious faith, family background, or profession.

The fact that someone is related, a member of the religious community, or shares a professional title does not automatically qualify him to manage money honestly.

Background checks on advisers are a must. Use Web tools such as Broker Check at http://www.finra.org and the Security and Exchange Commission's adviser check at http://www.sec.gov to look into an adviser's history. A few hours of research is a small price to pay to confirm the honesty of someone who is asking for control of your hard-earned money.

The authors wrote the book, Financial Serial Killers: Inside the World of Wall Street Money Hustlers, Swindlers, and Con Men. The ideas expressed in this column are theirs alone and do not represent the views of Medical Economics. If you have a comment or a topic you would like to see covered here, please e-mail medec@advanstar.com

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