By Staff | July 16, 2009 | Last updated on July 16, 2009
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In light of the “advisor” Earl Jones scandal, Advocis offers some tips for spotting an investment scam.

“The first and most important warning sign is the advisor offers you some unrealistic and/or consistent returns on the investment,” says Greg Pollock, Advocis’ president and CEO. “Such promises are fundamentally contrary to the very nature of a stock market. Stock markets go up and stock markets go down. Legitimate results vary.”

Other warning signs include pressure to invest beyond your comfort level.

A responsible financial advisor or planner will understand your financial goals and objectives and how much money you are willing to risk in any investments.

A fraudulent advisor will lead investors to believe that all their money has been placed into one financial vehicle when, in fact, returns are the investors’ own money or more recently recruited investors.

Another hallmark of an investment fraud is a promise of exclusivity — sometimes described as a “special deal.” Legitimate investments are generally available to a broad range of investors.

Pollock uses an old saying investors should consider when deciding on an investment: “If it’s too good to be true then it probably is.”

To avoid an investment scam, Pollock recommends clients do the research. Get referrals from other clients and find out if the advisor has the appropriate licences and professional designations.

The next step is to verify all the information gathered. Verify that the money invested is going to a legitimate third party, such as a bank. The statements should include key information, such as a street address (not a post office box), a list of the investments and their activity over a period of time.

Then, verify with the appropriate licensing body that the advisor is duly authorized to do business in the province.

Finally, investors should ask questions. A fraudulent advisor may refuse to answer questions.

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U.S. consumers pessimistic about economy: RBC

U.S. consumer expectation of economic recovery continues to slide. The most recent results of the RBC CASH Index show a marked downward shift for July 2009, continuing the slide begun last month. The RBC CASH Index for July 2009 stands at 22.4, an 11.9 point decline from June’s 34.3 reading.

“The RBC CASH Index for July confirms what we first saw last month: consumers are getting realistic. They’re coming to grips with the idea that we will not see a quick economic turnaround but instead face a lengthy, drawn-out recovery,” said RBC Capital Markets managing director Larry Miller. “Consumer confidence is resetting to the levels seen earlier this year and is likely to remain there until there is concrete evidence of a turnaround.”

The survey also shows that consumer confidence in current conditions has stabilized after a dramatic drop last month, with the RBC Current Conditions Index for July 2009 standing at 23.3, an insignificant decrease of 0.5 points compared to June’s 23.8. This stability follows a plunge of nearly 50% last month, the largest single drop in the index since the start of the recession. Analysis indicates that, prior to the drop in last month’s survey, current conditions were buoyed artificially by soft gas prices and tax refunds.

Also, despite the unemployment rate reaching the highest level in 26 years, the RBC Jobs Index for July saw a minor uptick to 50.5, up 3.8 points from the 46.7 observed in June. The slight increase in confidence in the job market comes alongside growing indications that the rate of job loss is slowing. In July, 31% of consumers say it is likely that they or someone in their family or friends will lose their job in the next six months. This is down from 35% expressing similar concerns in June.

(07/16/09) staff


The staff of have been covering news for financial advisors since 1998.