Six ways to assure prospects your firm is legit

Scam artists rely on host of tricks, traps, and snares to bamboozle potential clients and customers. But there are ways for honest, hard-working financial advisers – which is to say, the vast majority of financial advisers – to send out a clear message to prospects that their firm is on the up-and-up. Here are six of those signal-senders, taken from ‘Finanical Serial Killers,’ a new book by Tom Ajamie and InvestmentNews’ Bruce Kelly.
[To find out more about ‘Financial Serial Killers,’ or to purchase the book, Click Here].

6. Go soft with the hard sell
Prospects are often suspect of advisers who try to pressure them into using their firm. Time pressure may work for used-care salesmen, but a) it’s a red flag for potential clients, b) you’re not selling used cars.

5. Steer clear of ‘guarantee’
To begin with, securities firms are not allowed to use the word ‘guarantee’ in reference to stocks. But with any investment, promising a possible client ‘guaranteed’ annual returns of 15 or 20% – with no risk involved – is at best, a stretch, and at worst, an out-and-out lie. Don’t overpromise.

4. Brother, can you paradigm?
Avoid speaking of ‘new investment paradigms,’ or ‘paradigm shifts,’ or secret investment methods. The basics of investing remain essentially the same, so don’t try to convince clients otherwise, or claim that you’ve uncovered a can’t-miss angle that has escaped all others. It rarely happens. And if it does, see #3.

3. Put it in writing
Fraudsters and scam artists often avoid putting things down on paper. They also tend to avoid offering basic details on how they’ll make money for you. Explain your investment strategy and style to potential clients in plain language, and, whenever possible, put things in writing.

2. Decode your accreditations
Advisers often have a bevy of abbreviations and titles that follow their names on their business cards. Explain what the alphabet soup of certifications actually means. And go over the difference between a fiduciary standard and a suitability standard. A recent survey showed most clients are clueless about an adviser’s standard of care requirement.

1. Don’t self-custody
It’s amazing how many high-profile investment scandals occur at firms that self-clear or self-custody. Granted, scores of legitimate firms self-custody. But using a reputable, well-known, third-party custodian will go a long away in convincing customers that you run a proper ship.