8 Tricks To Avoid/Prevent Financial Scams


1.       Look for skeletons in the closet: Before making any major financial commitment to a professional asking you for your hard-earned money, consider running a background check on them to identify any pattern of civil lawsuits, criminal issues, lost licenses, bankruptcies, foreclosures, etc. While it’s personal and you may be worried about offending them, remember that they asked you for your money, and that’s about as personal as it gets. Don’t be afraid to remind them of that! If they have nothing to hide, they should gladly participate in your due diligence. Here are a couple providers you might want to use that we have used in the past for hiring decisions and due diligence on vendors.

a.       Info Cubic
b.       Hire Right

2.       If they say they are “licensed”, confirm it – most professional designation and licensing programs subject a professional to a rigorous process to keep current. 1 – they have to stay out of trouble and 2 – they have to do continuing education. Most of the organizations that sponsor these licenses have a database, so the public can quickly look-up if someone is in fact licensed and in good standing.

 3.       Frequently check your credit report – the oldest trick in the book used by identity theft scammers involves taking out a loan in your name and running away with the money. This is difficult to avoid if a crook gets their hands on your personal information, but it’s easiest to flag if you make a habit of monitoring your credit report. When a loan is taken, most creditors submit an inquiry on your credit report. There are several services out there that will notify you when an inquiry has been made on your credit, or, if your credit history has a major change (like a new loan). Using one of these services can help you spot the issue early.

4.       Don’t provide your personal information over the phone. For starters, the IRS WILL NOT contact you by phone. They do things by mail. If the IRS is “calling you” hang up… it’s not actually them. If you get a call from your bank or insurance company and they ask to “authenticate” you before proceeding, ask for a call back #, then look up the call back # to make sure it’s actually your bank. A lot of scammers will call posing as your bank to obtain your online username, date of birth, social security # etc, to use on your various financial websites.

5.       Check your bank statements and credit card statements for unknown charges. This one is fairly obvious, but from working with clients, it’s amazing how many people don’t do this. Not only is a periodic review of your statements important for fraud prevention, it’s also important to avoid unknowingly wasting money. With todays’ most popular business structure being the “subscription revenue model” it’s incredibly easy to forget you are paying for certain services (many apps, websites, etc.) that you don’t use anymore… Services that are still dinging your credit card bill every month. Make a habit of doing this review at least every couple weeks.


6.       Be suspicious of guarantees. As the great Benjamin Franklin once said, “Nothing is certain except for death and taxes”. That absolutely applies to investments. Only FDIC insured bank accounts, CD’s and US treasury bonds are backed by the full faith and credit of the United states. Everything else has some element of risk of loss.  Even government guaranteed products, one could argue, aren’t guaranteed. If you meet a charlatan peddling guaranteed anything (particularly rates of return), tuck tail and head the other way.

7.       Live by the old auditor adage, “trust but verify”. With the internet, it’s SO much easier to do this than it was in the past. If someone says they have a unique offering, a patent, a license, an “in”, a hot tip, etc. do some back-channel research on what they told you via online searches to see if you can find any contradiction. If you are considering something like an investment in a new industry in which you are unfamiliar, asking around, particularly to other people whom you trust that might have some exposure and experience to it that you don’t.

8.       Ask for existing client references. This again is obvious, but make sure you do this with any professional you are relying upon for financial advice. If they can’t quickly get you at least 2-3 people who’d speak kindly of them and their service, that’s a telling sign. Possibly, this is characteristic of someone who has scammed people in the past.