The Daily Item, Sunbury, PA

Business

December 16, 2013

The Color of Money: Ask questions before you invest

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     -- (BEG ITAL)Who is your accountant?(END ITAL) Despite allegedly managing billions of dollars, Madoff used a virtually unknown accounting firm. Admittedly, this isn't a question a regular investor would think to ask. But Stoltmann says you should check to see who is doing the auditing if you aren't dealing with a large, well-known investment firm.

     -- (BEG ITAL)What's the investment strategy?(END ITAL) Madoff claimed he was using a "split-strike" strategy to make money. It's a legitimate strategy that involves terms such as "call and put options." It's a complex way to earn money and one that the average investor isn't likely to understand. "Investors need to peel the onion, kick the tires and understand how their money is being invested," Stoltmann said in an interview. "And if you ask and still don't understand it, then you should consider other investment alternatives. Confusion and complexity is a scammer's best friend."

     If you don't understand how your money will make money, don't invest. Don't listen to the promise of returns, no matter how good they sound.

     -- (BEG ITAL)Do you have any history of customer complaints against you?(END ITAL) Use the Financial Industry Regulatory Authority's "BrokerCheck" system to research the backgrounds of current and former FINRA-registered brokerage firms and brokers. But even a check for past customer complaints isn't a guarantee that you won't be conned. "We've had cases where we've sued brokers who had a clean record," Stoltmann said. "Most people who lose money never come forward and complain."

     I attended an investment seminar at the request of a friend who suspected what she was being offered sounded funky. After the presentation, I began to ask questions. The more questions I asked, the more agitated the investment promoter became. At one point, she tried to stop me by suggesting she take me aside, away from the group. I protested, arguing that perhaps I had questions the others in attendance wouldn't think to ask or were too scared or intimated to ask. The fact that she wanted to shut me down for asking what I thought were very basic questions about the company's record and how our money would be invested was a huge red flag.

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