Speak Out: Interview with Don Blandin of Investor Protection Trust

The Bernard Madoff financial scam has left already worried investors even more anxious.
Trying to prevent financial scams isn’t easy since it’s human nature for people to be attracted to opportunities to gain money quickly, said Don Blandin, president of the Washington-based Investor Protection Trust.
He said that state officials are demanding his services more lately since the financial-markets collapse and the exposure of the scandal involving Bernard Madoff Investment Securities LLC of New York.

Don Blandin, President Investor Protection Trust

Mr. Blandin’s non-profit organization, which was established in 1993 to educate investors, works with state securities regulators to run investment and education programs at the local level. He said that advisers also need to get involved in educational efforts in order to help prevent consumers from getting scammed.
Investor Protection Trust offers investor education videos and has worked with The Kiplinger Washington Editors to develop booklets such as primers for investing in bonds and mutual funds. It teamed up with Washington-based AARP to create The Campaign for Wise and Safe Investing, a national and state-level partnership between AARP state offices and their local state securities regulators in 35 states. The primary goal of the campaign is help older investors.
Other programs include MoneyTrack, now in its second season on public-broadcasting stations, as well as other investor outreach projects.

Q. Is there anything good that can come from Mr. Madoff’s scandal?
A. I don’t know if I can find anything good, other than: People might be more vigilant right now. I think at this point, we need to get really mad.
These scams will continue. We can detect them but can’t necessarily prevent them. We can’t be there when people are making decisions. They want some place to put their money and make it grow, but they are making mistakes. Even in the days following the Madoff scandal hitting global media, people were calling and saying, “I just heard about a good investment deal.”
You start pulling your hair out and ask what it will take for people to understand the best ways to protect themselves so they won’t get victimized by these talented con artists.

Q. Even advisers and individuals in the financial services sector got caught up in this scheme. How can advisers protect themselves from being scammed?
A. Practice what you preach. Advisers tell their clients that when they purchase something, make the check out to the institution and not to me personally.
Checks were made out to Bernie Madoff’s firm. But statements were coming from Bernie Madoff, not from the institution that was managing the funds. Those are two things you tell investors: Don’t make out checks to individuals and don’t accept statements coming from people. Those are two red flags right there.

Q. What changes would you like to see to help better protect investors, especially since officials at the Securities and Exchange Commission had received complaints about Mr. Madoff years ago?

A. I’m very confident that there will be some changes in the system to prevent this from happening. The question is what those will be. Will there be multiple checks from multiple organizations? If you have to investigate someone, should more than one person know about it? Also, can just one person nix an investigation without telling others?
The Madoff case does show that if you’re dealing with one agency and the agency doesn’t have capacity, then you need other systems in place to protect the investor first and foremost. However, having said that, you can detect fraud, but you can’t prevent it: As long as there’s someone willing to part with money on a smile and handshake without doing any due diligence, you’ll continue to have people lose money.

Q. What kinds of outreach does your group plan to do this year in terms of investor education, particularly in light of the financial crisis and the Madoff scandal?

A. The key thing we do is try and be in front of investors when they’re in their learning process about investing. We speak directly with investors.
We work with the states’ securities regulators to educate the public. I have no problem with someone explaining their product, but if investors haven’t learned the process of investing, they’ll be on dangerous ground when someone says a product is good for you.
We’re doing what we’ve been doing, but now we’re getting more demand to do it more often. We’re speaking with large groups and small groups nationwide.
Madoff always comes up. People haven’t quite internalized the impact of the scandal. At first it seemed like the rich golf set, and it “didn’t impact me.” Now people are realizing how much it did impact them because their foundations lost a lot of money, and people lost their jobs and their entire life savings.

Q. Is your agency partnering with anyone?

A. We partner with organizations such as the state securities regulators in order to make them as effective as possible.
One of the partnerships is a model program we’re rolling out across the country. It’s called: How can I? In this case, how can I afford retirement? We’re doing that with the Boston Public Library and launching it in Minnesota, Florida, California, Arkansas, New York and Georgia.
We’re trying to build a good foundation to meet and help consumers and answer their questions. As part of that program, we’re also working with other organizations such as the [Denver-based] Financial Planning Association to develop education workshops for investors. Advisers are on hand to educate consumers about investing.

Q. Do you lobby Congress, and what type of outreach have you had with regulators regarding the financial crisis?
A. We’re not a lobbying organization. I go to [Capitol] Hill once a year for Financial Literacy Day, which is meant to showcase money management education tools aimed at youth and adults across the country. We’ve given testimony on the Hill about investor education and protection. We’ll stand as an expert resource on this topic as needed.

Q. What are the lessons to be learned from the Madoff scandal?
A. When you talk about investing, you need a long-term mentality. If you’re looking for quick gains or to get rich quick, they’ll be out there but likely won’t be for real. Invest in what you understand. If you don’t understand what you’re investing in, don’t invest. Don’t wear blinders.

Q. Do you think we’ll see more guarantees in the 401(k) arena to help participants feel more comfortable with their accounts?
A. Certainly, if you want to feel safer. But let’s face it — investing is a risk. If people get into investing and don’t understand, it’s a risk, and they shouldn’t be investing. Either you trust the capital markets or you don’t. Even if you do it right with good diversification and different sectors, you can still lose money.

E-mail Lisa Shidler at [email protected].