Monthly Archives: October 2015

11 Popular investment scams

My friend Kathleen and I after a hard afternoon of work.

When I used to work for a life insurance company, I used to feel like a scammer. I used to sell mutual funds with expense ratios of over 3% when I knew that there were similar mutual funds with expense ratios of less than 0.5%. I never felt that I was offering my clients the best product for their money.

Also, my boss would encourage me to push my clients into buying more insurance than they needed.

But my situation was not unique. The same scenario is practiced every day at most banks and life insurance institutions. They call it “Free financial advice.” The consumer is unaware that we are not financial advisers, we are financial product salespersons. The client has nothing to pay out of their pocket. Many of the clients are unaware that through undisclosed commissions they are paying an exorbitant price for the products they are buying.

Although the above mentioned practices are totally legal, once the cloak is taken off, it does have the appearances of a scam.

Here are some practices which are illegal scams and some practices which are completely legal but have the flavor of a scam.

1. The obvious: If you open your spam folder you will find them right away. The most obvious is the email about the Nigerian prince who will split his inheritance with you if you help him pay some government fees. Believe it or not, people fall for this kind of scam. That’s why you continue seeing them.

2. Phishing: This form of scamming is extremely sophisticated. The scammers try to make you believe that you are getting a message from your bank, the government, paypal, or any other legitimate organization, and they ask you to confirm your password. If you comply with their request, they can get access to your account or identity, and they can easily steal money from you.

3. Insurance Companies: When an insurance salesperson persuades you to buy life insurance when you have no dependents, I consider this a scam.

4. Mutual fund salespeople: Most the of mutual fund salespeople who claim to be “YOUR” adviser, hide or downplay critical information about competitive products which offer similar returns at a much lower expense ratio.

5. Bank tellers: Many bank tellers try to up-sell you on a higher fee credit card which you don’t need. If they succeed, they’ll get a nice sales commission.

6. Retail stores bait and switch technique: Retail stores advertise amazing deals to get you to go to the store, but when you get to the store, the product which they advertised just ran out and they try to sell you a different product with a higher profit margin.

7. The donation scam: As soon as there is a natural catastrophe somewhere in the world, we  start to see non profit organizations collecting money for the needy. Some of these institutions are 100% scams.

8. Charity institutions: Some charity institutions are completely legal but when 95% of the donation money goes towards administrative expenses and only 5% or less reaches the needy, I feel that those institutions are a scam. Here’s a list of the 50 worst charities.

Martin Luther: He strongly disputed the claim that freedom from God’s punishment for sin could be purchased with money. His refusal to retract all of his writings at the demand of Pope resulted in his excommunication by the Pope and condemnation as an outlaw by the Emperor.

9. The catholic church. At one time, the catholic church used to sell indulgences “which may reduce either or both of the penance required after a sin has been forgiven, or after death, the time to be spent in Purgatory.” If you want to go to heaven, all you have to do is to give some mullah to the church. Thank you Martin Luther for revealing such a big scam.

10. Family and/or friends: When a family member or friend asks you to lend them money knowing that there is little probability to pay you back, this is a big painful scam.

11. The new boyfriend/girlfriend. As a money coach I have seen this one more than once. The new boyfriend/girlfriend needs a short term loan to fix a particular problem or take advantage of a fantastic opportunity. If the answer to the loan is negative, somehow the relationship dies shortly thereafter.

How can we protect ourselves from being scammed?

  • Just by reading this blog, you are becoming aware of some of the most popular scammy practices. Being aware of different scams reduces the probability of becoming a victim.
  • Don’t click on links of suspicious emails. Some of those links could download spying software which could uncover your passwords and other personal information.
  • Do research in the Internet about the suspicious activity your are concerned about, followed by the word “scam” for example: “real estate scams.”
  • Be skeptical when a business opportunity sounds too good to be true.
  • Don’t give personal information to strangers, such as address, social insurance number, or date of birth. If your identity is stolen scammers can apply for credit using your name and you could end up being responsible for it.
  • Take your time before making any financial decision. Consult with your friends, your accountant, your lawyer.
  • Give to charities that have a good track record. At least 75% of your money should go towards the needy and less than 25% should go towards administrative expenses.
  • Question the quality of your relationship if your new boyfriend/girlfriend asks you for money only a few weeks into the relationship.

If you would like to share other scams or if you have been victim of a scam. Please share your story. I will put it in the blog with a link to your website.

Scams experienced by readers of this blog:

I was desperate to find a place in Vancouver during the summer because my landlord back then sold his house.
I look all over craglist and found a post w really nice pictures and really affordable. The guy claimed to have to leave for a job in Europe and is already in Europe.

So he said he’ll send his keys through airbnb, which would hold his package until i send airbnb the deposit. If I didn’t like it after seeing the place then i return the package and airbnb return my money back

I was suspicious then because 1. Many people must have contacted him, but he picked me anyway without asking much about me? Not even skype? You don’t just hand over your place for a year to a stranger. 2. I use airbnb and i dont think they have that service

Anyhow when I actually got the email from ‘airbnb’ I could tell that the domain name of the email is not the real airbnb. They call themselves airbnb inc (and if you search the name and their address on the internet they’re listed in on a company list website in Britain, ie they faked a company) And that the airbnb logo is badly stretched out and the lease and official documents, though long, contained typos
 Worse thing is they are collecting money through moneygrand

Anyhow, I called him out and contacted craglist about his post. I’m sure many people fell for it though.

Lesson, raise suspicion when things are 1. Too good/easy to be true 2. Involve giving money or personal information.

Recently the phone scam Canadian Delivery Express

There are those scam artists who hang outside the Bell Center before an event asking for donations. I once asked if I could have a pledge card to make my donation and the lady just ran away.

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Book Review: Let’s get blunt about your financial affairs

bluntI have read hundreds of personal finance books and I promise you, this book is different.

Most personal finance books are about how to create a budget, how to set goals, how to save for retirement, school, education, a house, and even a wedding, and that’s where most personal finance books end.

And that is where this books starts. Have you ever watched a Hollywood romance movie in which, after some kind of drama, the couple gets united and lives happily ever after. You see them walking into the sunset, and you ask yourself: “And then what?” This book is the “And then what?” of personal finance.

The book starts with how to be an executor of a will. I have never seen any personal finance book about how to be a good executor. Then it goes into how to distribute your wealth among your survivors, how to be fair to everyone while paying the minimum amount of taxes.

Spending time with friends
Spending time with friends

Mr Goodfield is an accountant by profession and his accounting knowledge takes center stage. He explains the tax side of many personal finance issues, such as:

  • How to survive a tax audit
  • How to deal with rental properties
  • How to spend your retirement savings without running out of money

This book is not for beginners. This book is geared towards people who already have some assets, people who are not in the accumulation stage of life but in the distribution stage of life. At the same time it is understood that the reader must have some personal finance knowledge.

When it comes to tax talk, it is necessary that the reader has a basic knowledge of the Canadian tax system and has a certain comfort with numbers.

The book is a collection of the best blog posts Mr Goodfield has written in his blog “The Blunt Bean Counter.” As such, the book feels like a conversation. Mr. Goodfield tone is satirical, sarcastic, funny and friendly. Although his knowledge is vast, he doesn’t come across as a know-it-all guru.

If you are at the financial stage where this book could be useful to you, I assure you that by putting any of Mr. Goodfield’s advice into practice, you could save thousands of dollars.

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