Grand Junction business Valley Investments is under investigation by the FBI and has been accused of fraud by state authorities. With more and more news of people losing their life savings in investment deals gone bad, local advisers are sharing ideas on how to avoid making a very costly mistake.
Tom McNamara has been a financial adviser for Arbor Financial Group for more than ten years. In that time, he says he's seen all the ads and heard all the talk from brokers who promise people double digit returns on their investments.
"The pitfall in all of this investing is that we expect more than what can be delivered," said McNamara.
In the rush to cash in on those promises he says he's seen many investors fork over their money without realizing what they're getting into -- until it's too late.
"I think we've seen the calamity of that," said McNamara. "Not scrutinizing to whom we're giving our money.
When it comes to protecting your money, he says knowing who is handling your assets is a must. First, make sure the adviser has a license. If they don't, take your money somewhere else.
"It's really walking on eggs and defies common sense to place your money with people who have not been tested and licensed," said McNamara.
McNamara says it's also important to know about the adviser's reputation, experience, and history.
"That's all documented public information," said McNamara.
The Financial Industry Regulatory Authority has an online database of individual brokers and firms across the country where all of that information can be found. It's a quick, easy way, McNamara says, to see if there are any red flags.
"Certainly investigate these websites," said McNamara.
He says it's also important to pay attention to your role in the adviser's investment strategy. Make sure you get some kind of say in where your money goes.
"Having a broker or an investment adviser having full discretion with your money is just asking for trouble," said McNamara. "It's a trap."
Finally, he says don't fall for golden promises of double digit returns. In this uncertain market, good investments are only seeing returns of about 2 percent.
"If it sounds too good to be true, it most certainly is," said McNamara.
McNamara says in the case of Valley Investments owner Phillip Lochmiller, he did not have a license, had a criminal history in California, and was promising people unrealistic returns -- someone he says people should never have invested with in the first place.
To check the FINRA's online broker database click on the link below.
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