October 21, 2025 • 28 mins
Fraud doesn’t always look like a Ponzi scheme. Sometimes it’s a smooth voice, a business card, and a “don’t worry, I’ve got it.” In this episode, Jerry unpacks how advisor misconduct happens—from misusing client funds to risky bets that go bad—and why the fallout can reach far beyond your portfolio and straight into your credit report. You’ll learn the red flags to spot, how to “trust but verify” with large vs. small firms, and the practical steps to lock down your identity and credit so one person’s bad decision doesn’t become your long-term problem. Empowerment = attention + action.
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Episode Transcript
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SPEAKER_00 (00:01):
The following podcast is for entertainment and
educational purposes only.
Remember to seek competent tax,legal, and investment advice
that is unique to your personalcircumstances.
(00:38):
Hey everybody, and welcome tothe Pink Bunny Podcast.
I'm your host, Jerry Williams,and we talk about all things
related to money from a gayperspective.
And today I'm going to talkabout two things that you might
not think have much to do withone another: credit scores and
financial advisors misconduct.
Because they do, funny enough,do connect, and I'll show you
(00:59):
how.
But first of all, I what reallyprompted all this is I happened
to go on to an article or findan article, I should say, that
was a little bit strange to me,only in the sense that I hadn't
heard this story before.
But that doesn't mean anythingreally.
But what happened was I guessthere was a financial advisor or
(01:22):
financial analyst who was one ofthose talking heads on CNBC.
And apparently, you know, hethey invited him on.
You know, when you see thesepeople, they come on and talk
about all kinds of things, youknow, get their opinion, their
take on such and such, whatever.
But what happened was this guy,he made a big bet against the
(01:44):
market.
Meaning, this was back whenprior to the most recent
election, and his belief wasthat with the current election
that was going to happen, hethought that the market was
going to crash and the economywas going to take a turn for the
worst.
And so what he did is he placedsome big shorts, which is again
(02:08):
a way of saying, hey, I thinkthe counter is going to happen.
And so you again, these areoptions that you buy, and I
always really steer clear, tellpeople steer clear of options
unless you really know whatyou're doing.
Or you know, again, work withsomebody who really knows what
they're doing because they canbe helpful, right?
I mean, like calls, calls can bedefinitely helpful on your
(02:28):
portfolio.
A lot of good financial advisorswill take a short position on
something, or they will put likea straddle on your portfolio,
again, depending on thecircumstances and if they think
that it warrants it.
But it can act kind of likebumper rails, you know, or
guardrails, if you will, on yourportfolio.
And of course, if you're agambler, you can buy puts and
(02:49):
calls to your heart's delight.
And that's up to you.
But I've seen lots of people getburned, really.
I mean, even good financialadvisors I've seen lose
thousands and thousands ofdollars by betting against
whatever stock or whateverposition they're taking.
Because to me, the market isjust very unpredictable, and you
might win, but you might lose,and when you lose, often you
(03:11):
lose big, and that's just adifficult pill to swallow.
Anyway, so what I was what I waslooking at is this financial TV
analyst was a one-time fugitivebecause he was on the run for
three years, because he wasscamming his clients, and he was
ultimately sentenced to fiveyears in jail.
(03:33):
But what happened was he madethese bets on again the market
and the outcome of the election,thinking again things were gonna
take a turn for the worst, butit ended up being the opposite,
and so he ended up owing lotsand lots of money, and his
clients lost lots and lots ofmoney.
And not only did he bet, youknow, wrong against the market,
(03:55):
but he had a difficult timecovering those because he was
taking money from his clients,and he was buying things like
expensive cars and you know,using it their money for his
personal expenses, and evenexpenses for the firm, all of
which is totally illegal,illegal, and it's I mean,
unethical at best, and at worst,like I said, it's illegal, and
(04:21):
that's what it landed him in hotwater and ultimately landed him
in jail.
But there's lots of otherfinancial advisors that do
really strange things, and Idon't know, I suppose it's greed
that really drives a lot of thisbehavior, because I ran across
another paper that talked aboutthis, and it's by Stanford
(04:43):
University, and the author ofthis, I think I believe his name
is Amikatu Saru,A-M-I-T-U-S-E-R-U.
The date of this was apublication date, March of 2018.
(05:05):
So what he did was he went inand looked at various firms with
high rates of financial advisormisconduct, and then he ranked
them.
And he did this by firm, and healso did it by region.
In a nutshell, I'm gonna say alot of misconduct was
predominantly back east, andthat's where a lot of financial
(05:27):
firms are really headquartered,or where you find such a large
concentration of these people,because think about it, where's
Wall Street, right?
But the further you go towardsthe West, it doesn't mean there
can't be financial advisors,registered investment advisors,
etc.
But you're typically not goingto see the same concentration.
And the difficult thing aboutthis is this cuts across all
(05:52):
firms, right?
And that's really disturbingbecause you a lot of times you
come to rely on what you wouldbelieve is going to be a solid
financial firm that's gonnatreat you right and the advisors
are going to do their best foryou.
And I would say that is 100%true for the most part.
(06:14):
But as we know, there's badapples in every bunch, right?
And there's just tons and tonsof stories, unfortunately.
Because when I think people aredealing with other people's
money, the temptation for somepeople is just too much.
You're looking at thousands ormillions of dollars, and you
start thinking, wow, I wish Ihad that.
And hmm, well, if I did this, Icould do this.
(06:36):
And especially when you'reworking for a brokerage firm or
what have you, you know kind ofthe ins and outs of what it
takes to move money around andhow to withdraw money, and what
are the requirements that thebusiness looks for, etc., etc.
And a lot of it is not terriblydifficult.
Let's say if you're going to doa distribution or withdraw or
(06:58):
redemption, what have you.
You know, most of the financialadvisors do these trades
themselves.
It's super easy.
I mean, unless you're doing ityourself.
So they go in, they place atrades, et cetera, and then they
free up the cash.
And then typically when thecustomer wants their money, then
they send it to them by a wiretransfer or check, what have
you.
But, you know, so it's prettystraightforward.
(07:19):
But you can do all sorts ofthings because, again, you have
the knowledge of what it takesto move money around, right?
You can open separate accountsfor them and you can do like a
letter of instruction for thefirm telling them what to do, et
cetera, et cetera.
And as long as there doesn'tappear to be any fraud on the
surface, then most likelythey're gonna go ahead and do
(07:40):
that, especially when thefinancial advisor is the one
telling them to do this.
And I'm talking about like theback office.
So yeah, they try to dot theirI's, cross their T's, of course,
but for the most part, they'regonna believe that the financial
advisor is doing the rightthing.
Plus, there's usually what theycall a principal, which is
somebody who oversees thefinancial advisor.
Because everybody that is in anykind of investment company is a
(08:05):
registered investment advisorrepresentative to one degree or
another.
That means the FINRA or the SECand both, you know, have their
hands in running theseorganizations in terms of their
compliance and are they doingthe right thing for the right
reasons, right?
And so they have a principalwho's like a 24 or 26 or
(08:26):
whatever it is, and these peopleoversee again are responsible
for the work that these otherpeople are doing, not like their
supervisor per se, right?
That's someone who is gonnaguide you, rate you, coach you,
and give you feedback and youknow, does your performance
reviews and all that kind ofstuff, right?
That's really separate.
Can they be the one the same?
(08:46):
Yes.
Can they be different people?
Often.
So, in that sense, thesupervisor may not be the one
that's keeping a very close eyeor reverse.
It may be the principal who'snot doing their job and not
keeping a close eye, and thingsslip under the radar, and next
thing you know, there's a bigproblem that occurs.
In this one instance, this was adated March 27, 2005.
(09:13):
Former financial advisorsentenced to 12 years in federal
prison for multimillion dollarfraud scheme.
Not good, right?
Not good.
Um, not good for him, andprobably not good for his
clients.
So this one guy, and this isgoing back to the TV analyst
guy, in it says early 2021, hesolicited millions of dollars
(09:35):
worth of funds from investors inthe form of purported capital
raised for Hercules, his firm,but misrepresented how the funds
would be used and failed todisclose the massive losses
Hercules previously sustained.
As part of the capital raised,uh McDonald obtained$675,000 of
investment and funds from onevictim group.
He misappropriated most of thosefunds in various ways, including
(09:58):
spending$174,000 on a Porschedealership, transferring$109,000
to the landlord of the home hewas renting.
You get the point, right?
So he was not doing the rightthing for the right reasons, and
then he went on the run for afew years and then they finally
caught him.
But again, he's not the onlyone.
This other guy that says herethat he exploited his position
(10:22):
of trust as a financial advisorto deceive both his clients and
his employer for for personalgain.
Says the FBI was looking intohis activities and noted that he
abused his position forfinancial fraud, and he did,
again, lots of terrible thingswith his clients' money.
Not, and I'm saying he misusedit.
(10:44):
That's really what I'm saying,not like he murdered someone.
That obviously is totallydifferent, but it doesn't matter
here because I mean we all haveheard those stories with like
Bernie Madoff and those arePonzi schemes where those people
never got their money back,right?
Or very little because they hadto go in and he had to sell
everything and try to get asmuch money you could from the
firm, etc.
(11:04):
etc, etc.
And that's just a difficultthing to do, and it could take
years, right?
But back to the paper that I wasreading from Stanford, you'd be
surprised at the names of firmsthat have high instances of uh
misconduct.
And this is public.
You can go out there and you canread this yourself.
(11:26):
The publication is MisconductUnder the Microscope, Examining
Bad Behavior by FinancialAdvisors.
And you can go look this up andsee for yourself.
But um the firms, I'm just gonnaread a few.
I'll just go on the top five,but you know, these are
well-known companies likeOppenheimer, First Allied
Securities, Wells Fargo, UBS,National Planning Uh
(11:48):
Corporation, Raymond James,Steve Stiefle, uh Morgan
Stanley, on and on.
Wells Fargo, I already saidthem.
Anyway, and on the flip side,though, there are companies that
have very, very low rates ofmisconduct.
And chiefly one of them thatdoesn't have an investment firm
anymore was USAA.
(12:09):
And they were really well knownfor very ethical and highly
competent employees, financialadvisors, and they really prided
themselves on their ability toretain and work in the best
(12:30):
interests of their clients.
So they were known as atrustworthy organization, and
their financial advisors, youknow, acted in the best
interests of the clients becausethey did not gain anything from
advising or buying and sellingin a person's portfolio.
(12:52):
They were paid straight salary.
So whether the client hit it bigor barely broke even or took a
loss, none of that affected thefinancial advisor's pay.
Now, some advisors, notnecessarily at that firm, but
some advisors, if they sell yousomething, then they are gonna
get paid.
There's a lot of like loadedmutual funds that have B shares,
(13:15):
etc.
And that's how they get paidwhen they sell you something,
then they receive you know a cutor a you know, the firm will pay
them a certain percentage,whatever it is.
But almost all, as far as Iknow, and I would say this is
just really common, is by andlarge, all financial advisors
(13:36):
have a fiduciary responsibilityto you, and that means again
that they're supposed to act inyour best interest, they're not
supposed to put their interestsahead of yours.
We know human nature issometimes get the gets the best
of people, right?
But by and large, that's whatthey're supposed to do.
And that really behooves you toask questions when you speak
(13:57):
with somebody about how they aregetting paid, and they should
show you and tell you.
And you can take a look and youcan see, like on broker check,
you can take a look and see ifthese people have had any
incidences of misconduct.
And that might be a red flag toyou that maybe you want to move
on and talk with somebody else,right?
Because if they did it once, Imean, maybe they got their hands
(14:18):
slapped, but I mean, maybe theycould do it again.
And do you really want to be onthe receiving end?
Probably not.
Now, with that being said, too,I usually recommend that people
go to large financial firms, youknow, the Charles Schwab, the
Fidelity, the e-trade, you know,Vanguard, etc., etc.
Because by and large, even inthe instance where let's say you
(14:39):
are with one of these firms andthe advisor does something bad
and they you suffer therepercussions of it, it's
because they're such a largecompany, they're gonna make it
right for you and prettyquickly.
If you're with this, you know,no-name firm per se, you know,
it doesn't mean that you won'tget your money back, but if it's
(15:02):
an individual like this guy, youknow, who bought the Porsche
stuff and went on the run, it'sI don't know what it's gonna
take to get your money back fromthem, right?
It's gonna be a long slog andprobably difficult.
So you I always say you can gowith obviously anybody you want,
but do your due diligence, doyour legwork, and really think
(15:24):
about who you're giving yourmoney to in terms of who's
overseeing your money and whatkind of leverage do they have,
or what kind of power did yougive them to oversee your
account?
Can they make trades all ontheir own without you?
Or do you have to approve allthe trades?
And even if they place thetrades for you, do you really
(15:46):
know what's happening justbecause they say this is gonna
be good for your portfolio,right?
And you blindly just trust them.
So even in these the best offirms, right?
But what I'm trying to say is ina large firm, there's usually a
second set of eyes, and maybe athird set of eyes.
So that, you know, this advisorwho made this recommendation and
(16:08):
is going to place this trade,these trades go under the
microscope, they go underscrutiny for of compliance.
And there's the compliance teamthat looks at it and asks
questions and is it welldocumented why they're doing
what they're doing?
And they are again making surethat everything is done right.
And sometimes all those piecesare not in place with smaller
(16:29):
firms.
That's all I'm saying.
Because you can go to thesewealth management firms,
financial planning firms, on andon and on firms, but are all the
right pieces there?
And you may or may not knowbecause again, you don't know,
right?
Unless you work on the inside,like you know, I was for years
and years and years.
I've seen it.
I've seen good decisions, baddecisions, and all kinds of
(16:52):
crazy decisions, right?
And that's another story foranother day.
I don't want to go into allthat, but all I'm saying is you
really need to be careful.
With that being said, let meshift over to the next lane and
let me talk a little bit aboutyour credit score and your
credit report and what thatreally entails and how it can go
wrong for you.
So as you're monitoring thingsfrom your financial advisor,
(17:14):
with let's say checking yourstatements, checking your trade
confirmations, etc., um,hopefully you're doing that on a
regular and consistent basis.
And you're also meeting withyour advisor on a regular basis,
right?
So you can ask questions andthey can explain what they're
doing, why they're doing.
But in credit score situation,you're generally not going to
(17:36):
know what's happening unless youcheck your credit score, right?
Because then your score isreally going to tell you and be
a red flag too if something ishappening that you need to pay
attention to.
So if your credit score dropssuddenly by, you know, not just
like one or two points, but manypoints, right?
(17:57):
That's something you need tolook into.
You need to pull your creditreport and you need to figure
out what's going on.
And if you have to, then you canfreeze your credit report and
then nothing can happen becauseno one's going to be able to
gain access to your credit,meaning nothing it's going to
penetrate your credit scorebecause it'll bounce right back.
(18:20):
Because if your uh identity hasbeen stolen or compromised or is
you know found on the dark web,etc.
etc., there's all sorts ofhorror stories.
Then what people do is they getyour social security number or
they get all your pertinentinformation and they open
accounts in your name and theyopen credit cards in your name,
and then they miss payments, andall they're trying to do is
(18:44):
misuse your identification andyour good credit, and then they
blow it because they're justscammers and schemers, and all
they're trying to do is, youknow, take as much as they can
get from you.
So when you look at your creditscore on a regular basis, that
is your ability to say, let'ssay my credit score has always
(19:07):
been 760, and all of a suddenit's you know in the 600s, then
that would be something to payvery close attention to, right?
And I know a lot of peopledon't, but it's saying that you
should.
One thing that you can do is youcould go onto Social Security,
right?
Sounds like why would I go toSocial Security?
But you would go into SocialSecurity and you would create an
(19:29):
account with Social Security,and they capture all your
pertinent information that youput in there yourself.
So then it's locked down becauseyou put it in there versus some
scammer puts it in there, theycreate an address over in the
Virgin Islands or wherever itis, and they are the ones that
when they submit an applicationfor a credit card or home equity
(19:51):
or whatever, then thatinformation is going to go
through for them.
But when you come to realize allthis, it may be too late.
All I'm saying is that can be agood way to lock down your
information through SocialSecurity.
So again, these things willbounce back on them and they
won't be able to take advantageof you.
(20:11):
So you can always, you know,call Experian or TransUnion or
Equifax, you know, those are thethree big credit reporting
agencies, and you can lock downyour credit score report, you
know, at any time.
You can if you want to.
Again, and then they have toreally get your authorization,
and you you then let's say youapply for, I don't know, some
(20:33):
personal loan or whatever, thenyou know you have to unfreeze
it, and then they allow thatscore to be pulled, and then if
an account is opened, then youknow that you opened it and for
what reason, and you're it's nosurprise, right?
But you want to take a look atthings that are within your
control, and that means like Imentioned your statements and
(20:56):
looking at your confirmationsand your quarterly reports or
whatever it is that or howeverfrequently you get your
information, or you just goonline, you know, whatever.
And similarly, with yourpersonal information that's out
there tied to your socialsecurity number, you really want
to keep a close eye on that.
(21:18):
So fraud is rampant, and it'svery unfortunate.
I believe I saw a statistic thatsaid 20% of financial advisors
have some element of misconductagainst them.
And that's pretty shocking,right?
And that means that they've donesomething that they got their
hand slapped at best, and atworst, again, then they wound up
(21:41):
in jail, and that's bad for you.
Especially again if you've lostmoney and you're now trying to
get it back.
Very long road, as I said.
Not to belabor the point.
Hopefully you got the point thatI'm making, and that these are a
couple of tools that you can useto your benefit that are going
to be helpful to you.
The only other point I'm gonnamake is paying attention to what
(22:06):
people tell you.
And what I mean by that is weall know that you can talk to
your neighbor, your betwhomever, a good friend of a
good friend who's gonna give youthe hottest stock tip.
Uh, they're telling you thatthis guy double-tripled their
portfolio for them, andeverybody always paints this big
rosy picture, and you start tothink, hmm, maybe I have missed
(22:30):
a boat.
Maybe I should be investing inXYZ stock or you know what have
you, because everybody elseseems like they double-tripled
their money.
And I want to double-triple mymoney too.
But lots of people, I mean, thefish is a lot bigger than the
one that they actually um pulledout of the lake, right?
So you want to be very carefuland cautious before you do
(22:51):
anything like that.
Because in my mind, you reallyhave to know what you're doing
and is it comfortable for you todo it.
And if it's not, again, trustyour gut and it says, this is
not for me.
If you want to go down the routeof being more conservative than
everybody else, that's totallyfine, right?
You might not get the doubletriple returns, but at least you
(23:12):
know your money's there when youwant it to be there.
And investing is not foreverybody.
I mean, you don't have to investbecause everybody else is
investing.
You invest because you want toinvest.
And you don't have to invest allyour money.
You can invest just a smallportion or whatever amount that
you feel comfortable with.
And you can go low risk, mediumrisk, high risk.
You can have a mix of all that,which is generally a good idea.
(23:35):
But you can be just asconservative as you want to be.
And typically, as you growolder, then you become more
conservative because then you'reabout to start withdrawing money
from your portfolio.
So you want it to be much, muchmore conservative because you
want it there when you need itthere.
Generally, the rule of thumb iswithin five to ten years of your
retirement, then your portfoliois going to be shifting gears
(23:56):
and going down in terms of risk,becoming more conservative again
for those particular reasons.
Generally, you do need somemoney that is still tied to the
stock market itself.
Again, it can be low risk,medium, high risk.
That all depends on what levelof risk and how it's defined for
you and maybe your financialadvisor.
But let's say you do have somemoney in the S P 500, and what
(24:20):
that really helps to do in termsof your portfolio is make sure
that it helps to keep pace withinflation.
If your portfolio is in a very,very conservative mix, let's say
it's in certificates of deposit,even in times like today, CD
rates are still relatively high.
Are they going to get you a 10%return on your portfolio
overall?
(24:40):
Probably not.
But again, you know your money'sthere.
We've all heard stories aboutpeople, you know, back in the
1930s, and you know,great-grandmother always kept
all of her money in themattress, and she never, you
know, trusted anybody with hermoney, and she just saved it,
and she had a bunch of moneythen when she passed away,
right?
My only caution there is if yourmoney's all on your mattress and
(25:02):
your mattress catches on fire,then what do you have?
Burnt paper or whatever it'smade out of.
But all I'm saying is we don'treally want to go down that
route route, but we understandthe principle behind it.
And that's just saying be asconservative as you want to be
when you need to be conservativeand be aggressive, like in your
early years, because you cantake the risk, and if the market
(25:23):
goes south and you have time torecover.
As you get older, you don't havethe luxury of time any longer.
It's starting to work againstyou, and then that's okay
because again, if you'restarting to withdraw on your
portfolio, that's a whole reasonthat you started saving and
investing to begin with, becausenow you need your money.
Same thing, like I said, withthe credit score, is you've
worked hard at making it gettingit to the level that it's at, so
(25:46):
you have good credit, so you canget the best interest rates when
you do take out a loan, personalloan, credit card, home equity,
auto loan, whatever it is.
Then again, because your creditscore is high, then you get the
better rates than somebody whosecredit is not so great.
And you don't want to be in thatposition of having not so great
(26:07):
credit because that's harmful toyou, costs you money, and it
takes a long time to rebuildyour credit back up, even if
it's no fault of your own,right?
Like somebody has misused youridentity and they did all sorts
of nefarious things, and nowyou're paying the price.
And it could take seven to tenyears to get this cleared up for
(26:27):
your for you, and that's just avery, very long time.
Again, you might not even havethat.
And especially as you age andyou're older, then we all know
that there's elder abuse, elderfraud, and it's so unfortunate
because I mean, again, I canspeak from firsthand experience
that when your parents age, evenyour grandparents, whomever you
(26:49):
take care of or you're close to,and you see them being taken
advantage of, it's just soinfuriating infuriating because
you know that they're slippingmentally and they're trustwort
they're trusting people, andthey don't realize that they're
going to be taken advantage of.
And I could go again into manystories of how this has
(27:13):
happened, and maybe I'll do thatas a companion post if you go on
to pinkmoneypodcast.com, thenyou can take a look at some of
the things that posted out therein the blog and in the companion
posts, and also I'll justmention it hasn't anything to do
with this per se, but you cantake a look at Jerry's playlist
(27:33):
too.
So there's my little plug for mywebsite.
Anyhow, I think that's prettymuch it.
And if you have any questions,you can uh drop me a line and
you can ask me a question andI'll respond to you.
Or if you need help withsomething, let me know and I'll
do my best to give you a hand.
And other than that, you have agreat day.
The following podcast is for entertainment and
educational purposes only.
Remember to seek competent tax,legal, and investment advice
that is unique to your personalcircumstances.
(00:38):
Hey everybody, and welcome tothe Pink Bunny Podcast.
I'm your host, Jerry Williams,and we talk about all things
related to money from a gayperspective.
And today I'm going to talkabout two things that you might
not think have much to do withone another: credit scores and
financial advisors misconduct.
Because they do, funny enough,do connect, and I'll show you
(00:59):
how.
But first of all, I what reallyprompted all this is I happened
to go on to an article or findan article, I should say, that
was a little bit strange to me,only in the sense that I hadn't
heard this story before.
But that doesn't mean anythingreally.
But what happened was I guessthere was a financial advisor or
(01:22):
financial analyst who was one ofthose talking heads on CNBC.
And apparently, you know, hethey invited him on.
You know, when you see thesepeople, they come on and talk
about all kinds of things, youknow, get their opinion, their
take on such and such, whatever.
But what happened was this guy,he made a big bet against the
(01:44):
market.
Meaning, this was back whenprior to the most recent
election, and his belief wasthat with the current election
that was going to happen, hethought that the market was
going to crash and the economywas going to take a turn for the
worst.
And so what he did is he placedsome big shorts, which is again
(02:08):
a way of saying, hey, I thinkthe counter is going to happen.
And so you again, these areoptions that you buy, and I
always really steer clear, tellpeople steer clear of options
unless you really know whatyou're doing.
Or you know, again, work withsomebody who really knows what
they're doing because they canbe helpful, right?
I mean, like calls, calls can bedefinitely helpful on your
(02:28):
portfolio.
A lot of good financial advisorswill take a short position on
something, or they will put likea straddle on your portfolio,
again, depending on thecircumstances and if they think
that it warrants it.
But it can act kind of likebumper rails, you know, or
guardrails, if you will, on yourportfolio.
And of course, if you're agambler, you can buy puts and
(02:49):
calls to your heart's delight.
And that's up to you.
But I've seen lots of people getburned, really.
I mean, even good financialadvisors I've seen lose
thousands and thousands ofdollars by betting against
whatever stock or whateverposition they're taking.
Because to me, the market isjust very unpredictable, and you
might win, but you might lose,and when you lose, often you
(03:11):
lose big, and that's just adifficult pill to swallow.
Anyway, so what I was what I waslooking at is this financial TV
analyst was a one-time fugitivebecause he was on the run for
three years, because he wasscamming his clients, and he was
ultimately sentenced to fiveyears in jail.
(03:33):
But what happened was he madethese bets on again the market
and the outcome of the election,thinking again things were gonna
take a turn for the worst, butit ended up being the opposite,
and so he ended up owing lotsand lots of money, and his
clients lost lots and lots ofmoney.
And not only did he bet, youknow, wrong against the market,
(03:55):
but he had a difficult timecovering those because he was
taking money from his clients,and he was buying things like
expensive cars and you know,using it their money for his
personal expenses, and evenexpenses for the firm, all of
which is totally illegal,illegal, and it's I mean,
unethical at best, and at worst,like I said, it's illegal, and
(04:21):
that's what it landed him in hotwater and ultimately landed him
in jail.
But there's lots of otherfinancial advisors that do
really strange things, and Idon't know, I suppose it's greed
that really drives a lot of thisbehavior, because I ran across
another paper that talked aboutthis, and it's by Stanford
(04:43):
University, and the author ofthis, I think I believe his name
is Amikatu Saru,A-M-I-T-U-S-E-R-U.
The date of this was apublication date, March of 2018.
(05:05):
So what he did was he went inand looked at various firms with
high rates of financial advisormisconduct, and then he ranked
them.
And he did this by firm, and healso did it by region.
In a nutshell, I'm gonna say alot of misconduct was
predominantly back east, andthat's where a lot of financial
(05:27):
firms are really headquartered,or where you find such a large
concentration of these people,because think about it, where's
Wall Street, right?
But the further you go towardsthe West, it doesn't mean there
can't be financial advisors,registered investment advisors,
etc.
But you're typically not goingto see the same concentration.
And the difficult thing aboutthis is this cuts across all
(05:52):
firms, right?
And that's really disturbingbecause you a lot of times you
come to rely on what you wouldbelieve is going to be a solid
financial firm that's gonnatreat you right and the advisors
are going to do their best foryou.
And I would say that is 100%true for the most part.
(06:14):
But as we know, there's badapples in every bunch, right?
And there's just tons and tonsof stories, unfortunately.
Because when I think people aredealing with other people's
money, the temptation for somepeople is just too much.
You're looking at thousands ormillions of dollars, and you
start thinking, wow, I wish Ihad that.
And hmm, well, if I did this, Icould do this.
(06:36):
And especially when you'reworking for a brokerage firm or
what have you, you know kind ofthe ins and outs of what it
takes to move money around andhow to withdraw money, and what
are the requirements that thebusiness looks for, etc., etc.
And a lot of it is not terriblydifficult.
Let's say if you're going to doa distribution or withdraw or
(06:58):
redemption, what have you.
You know, most of the financialadvisors do these trades
themselves.
It's super easy.
I mean, unless you're doing ityourself.
So they go in, they place atrades, et cetera, and then they
free up the cash.
And then typically when thecustomer wants their money, then
they send it to them by a wiretransfer or check, what have
you.
But, you know, so it's prettystraightforward.
(07:19):
But you can do all sorts ofthings because, again, you have
the knowledge of what it takesto move money around, right?
You can open separate accountsfor them and you can do like a
letter of instruction for thefirm telling them what to do, et
cetera, et cetera.
And as long as there doesn'tappear to be any fraud on the
surface, then most likelythey're gonna go ahead and do
(07:40):
that, especially when thefinancial advisor is the one
telling them to do this.
And I'm talking about like theback office.
So yeah, they try to dot theirI's, cross their T's, of course,
but for the most part, they'regonna believe that the financial
advisor is doing the rightthing.
Plus, there's usually what theycall a principal, which is
somebody who oversees thefinancial advisor.
Because everybody that is in anykind of investment company is a
(08:05):
registered investment advisorrepresentative to one degree or
another.
That means the FINRA or the SECand both, you know, have their
hands in running theseorganizations in terms of their
compliance and are they doingthe right thing for the right
reasons, right?
And so they have a principalwho's like a 24 or 26 or
(08:26):
whatever it is, and these peopleoversee again are responsible
for the work that these otherpeople are doing, not like their
supervisor per se, right?
That's someone who is gonnaguide you, rate you, coach you,
and give you feedback and youknow, does your performance
reviews and all that kind ofstuff, right?
That's really separate.
Can they be the one the same?
(08:46):
Yes.
Can they be different people?
Often.
So, in that sense, thesupervisor may not be the one
that's keeping a very close eyeor reverse.
It may be the principal who'snot doing their job and not
keeping a close eye, and thingsslip under the radar, and next
thing you know, there's a bigproblem that occurs.
In this one instance, this was adated March 27, 2005.
(09:13):
Former financial advisorsentenced to 12 years in federal
prison for multimillion dollarfraud scheme.
Not good, right?
Not good.
Um, not good for him, andprobably not good for his
clients.
So this one guy, and this isgoing back to the TV analyst
guy, in it says early 2021, hesolicited millions of dollars
(09:35):
worth of funds from investors inthe form of purported capital
raised for Hercules, his firm,but misrepresented how the funds
would be used and failed todisclose the massive losses
Hercules previously sustained.
As part of the capital raised,uh McDonald obtained$675,000 of
investment and funds from onevictim group.
He misappropriated most of thosefunds in various ways, including
(09:58):
spending$174,000 on a Porschedealership, transferring$109,000
to the landlord of the home hewas renting.
You get the point, right?
So he was not doing the rightthing for the right reasons, and
then he went on the run for afew years and then they finally
caught him.
But again, he's not the onlyone.
This other guy that says herethat he exploited his position
(10:22):
of trust as a financial advisorto deceive both his clients and
his employer for for personalgain.
Says the FBI was looking intohis activities and noted that he
abused his position forfinancial fraud, and he did,
again, lots of terrible thingswith his clients' money.
Not, and I'm saying he misusedit.
(10:44):
That's really what I'm saying,not like he murdered someone.
That obviously is totallydifferent, but it doesn't matter
here because I mean we all haveheard those stories with like
Bernie Madoff and those arePonzi schemes where those people
never got their money back,right?
Or very little because they hadto go in and he had to sell
everything and try to get asmuch money you could from the
firm, etc.
(11:04):
etc, etc.
And that's just a difficultthing to do, and it could take
years, right?
But back to the paper that I wasreading from Stanford, you'd be
surprised at the names of firmsthat have high instances of uh
misconduct.
And this is public.
You can go out there and you canread this yourself.
(11:26):
The publication is MisconductUnder the Microscope, Examining
Bad Behavior by FinancialAdvisors.
And you can go look this up andsee for yourself.
But um the firms, I'm just gonnaread a few.
I'll just go on the top five,but you know, these are
well-known companies likeOppenheimer, First Allied
Securities, Wells Fargo, UBS,National Planning Uh
(11:48):
Corporation, Raymond James,Steve Stiefle, uh Morgan
Stanley, on and on.
Wells Fargo, I already saidthem.
Anyway, and on the flip side,though, there are companies that
have very, very low rates ofmisconduct.
And chiefly one of them thatdoesn't have an investment firm
anymore was USAA.
(12:09):
And they were really well knownfor very ethical and highly
competent employees, financialadvisors, and they really prided
themselves on their ability toretain and work in the best
(12:30):
interests of their clients.
So they were known as atrustworthy organization, and
their financial advisors, youknow, acted in the best
interests of the clients becausethey did not gain anything from
advising or buying and sellingin a person's portfolio.
(12:52):
They were paid straight salary.
So whether the client hit it bigor barely broke even or took a
loss, none of that affected thefinancial advisor's pay.
Now, some advisors, notnecessarily at that firm, but
some advisors, if they sell yousomething, then they are gonna
get paid.
There's a lot of like loadedmutual funds that have B shares,
(13:15):
etc.
And that's how they get paidwhen they sell you something,
then they receive you know a cutor a you know, the firm will pay
them a certain percentage,whatever it is.
But almost all, as far as Iknow, and I would say this is
just really common, is by andlarge, all financial advisors
(13:36):
have a fiduciary responsibilityto you, and that means again
that they're supposed to act inyour best interest, they're not
supposed to put their interestsahead of yours.
We know human nature issometimes get the gets the best
of people, right?
But by and large, that's whatthey're supposed to do.
And that really behooves you toask questions when you speak
(13:57):
with somebody about how they aregetting paid, and they should
show you and tell you.
And you can take a look and youcan see, like on broker check,
you can take a look and see ifthese people have had any
incidences of misconduct.
And that might be a red flag toyou that maybe you want to move
on and talk with somebody else,right?
Because if they did it once, Imean, maybe they got their hands
(14:18):
slapped, but I mean, maybe theycould do it again.
And do you really want to be onthe receiving end?
Probably not.
Now, with that being said, too,I usually recommend that people
go to large financial firms, youknow, the Charles Schwab, the
Fidelity, the e-trade, you know,Vanguard, etc., etc.
Because by and large, even inthe instance where let's say you
(14:39):
are with one of these firms andthe advisor does something bad
and they you suffer therepercussions of it, it's
because they're such a largecompany, they're gonna make it
right for you and prettyquickly.
If you're with this, you know,no-name firm per se, you know,
it doesn't mean that you won'tget your money back, but if it's
(15:02):
an individual like this guy, youknow, who bought the Porsche
stuff and went on the run, it'sI don't know what it's gonna
take to get your money back fromthem, right?
It's gonna be a long slog andprobably difficult.
So you I always say you can gowith obviously anybody you want,
but do your due diligence, doyour legwork, and really think
(15:24):
about who you're giving yourmoney to in terms of who's
overseeing your money and whatkind of leverage do they have,
or what kind of power did yougive them to oversee your
account?
Can they make trades all ontheir own without you?
Or do you have to approve allthe trades?
And even if they place thetrades for you, do you really
(15:46):
know what's happening justbecause they say this is gonna
be good for your portfolio,right?
And you blindly just trust them.
So even in these the best offirms, right?
But what I'm trying to say is ina large firm, there's usually a
second set of eyes, and maybe athird set of eyes.
So that, you know, this advisorwho made this recommendation and
(16:08):
is going to place this trade,these trades go under the
microscope, they go underscrutiny for of compliance.
And there's the compliance teamthat looks at it and asks
questions and is it welldocumented why they're doing
what they're doing?
And they are again making surethat everything is done right.
And sometimes all those piecesare not in place with smaller
(16:29):
firms.
That's all I'm saying.
Because you can go to thesewealth management firms,
financial planning firms, on andon and on firms, but are all the
right pieces there?
And you may or may not knowbecause again, you don't know,
right?
Unless you work on the inside,like you know, I was for years
and years and years.
I've seen it.
I've seen good decisions, baddecisions, and all kinds of
(16:52):
crazy decisions, right?
And that's another story foranother day.
I don't want to go into allthat, but all I'm saying is you
really need to be careful.
With that being said, let meshift over to the next lane and
let me talk a little bit aboutyour credit score and your
credit report and what thatreally entails and how it can go
wrong for you.
So as you're monitoring thingsfrom your financial advisor,
(17:14):
with let's say checking yourstatements, checking your trade
confirmations, etc., um,hopefully you're doing that on a
regular and consistent basis.
And you're also meeting withyour advisor on a regular basis,
right?
So you can ask questions andthey can explain what they're
doing, why they're doing.
But in credit score situation,you're generally not going to
(17:36):
know what's happening unless youcheck your credit score, right?
Because then your score isreally going to tell you and be
a red flag too if something ishappening that you need to pay
attention to.
So if your credit score dropssuddenly by, you know, not just
like one or two points, but manypoints, right?
(17:57):
That's something you need tolook into.
You need to pull your creditreport and you need to figure
out what's going on.
And if you have to, then you canfreeze your credit report and
then nothing can happen becauseno one's going to be able to
gain access to your credit,meaning nothing it's going to
penetrate your credit scorebecause it'll bounce right back.
(18:20):
Because if your uh identity hasbeen stolen or compromised or is
you know found on the dark web,etc.
etc., there's all sorts ofhorror stories.
Then what people do is they getyour social security number or
they get all your pertinentinformation and they open
accounts in your name and theyopen credit cards in your name,
and then they miss payments, andall they're trying to do is
(18:44):
misuse your identification andyour good credit, and then they
blow it because they're justscammers and schemers, and all
they're trying to do is, youknow, take as much as they can
get from you.
So when you look at your creditscore on a regular basis, that
is your ability to say, let'ssay my credit score has always
(19:07):
been 760, and all of a suddenit's you know in the 600s, then
that would be something to payvery close attention to, right?
And I know a lot of peopledon't, but it's saying that you
should.
One thing that you can do is youcould go onto Social Security,
right?
Sounds like why would I go toSocial Security?
But you would go into SocialSecurity and you would create an
(19:29):
account with Social Security,and they capture all your
pertinent information that youput in there yourself.
So then it's locked down becauseyou put it in there versus some
scammer puts it in there, theycreate an address over in the
Virgin Islands or wherever itis, and they are the ones that
when they submit an applicationfor a credit card or home equity
(19:51):
or whatever, then thatinformation is going to go
through for them.
But when you come to realize allthis, it may be too late.
All I'm saying is that can be agood way to lock down your
information through SocialSecurity.
So again, these things willbounce back on them and they
won't be able to take advantageof you.
(20:11):
So you can always, you know,call Experian or TransUnion or
Equifax, you know, those are thethree big credit reporting
agencies, and you can lock downyour credit score report, you
know, at any time.
You can if you want to.
Again, and then they have toreally get your authorization,
and you you then let's say youapply for, I don't know, some
(20:33):
personal loan or whatever, thenyou know you have to unfreeze
it, and then they allow thatscore to be pulled, and then if
an account is opened, then youknow that you opened it and for
what reason, and you're it's nosurprise, right?
But you want to take a look atthings that are within your
control, and that means like Imentioned your statements and
(20:56):
looking at your confirmationsand your quarterly reports or
whatever it is that or howeverfrequently you get your
information, or you just goonline, you know, whatever.
And similarly, with yourpersonal information that's out
there tied to your socialsecurity number, you really want
to keep a close eye on that.
(21:18):
So fraud is rampant, and it'svery unfortunate.
I believe I saw a statistic thatsaid 20% of financial advisors
have some element of misconductagainst them.
And that's pretty shocking,right?
And that means that they've donesomething that they got their
hand slapped at best, and atworst, again, then they wound up
(21:41):
in jail, and that's bad for you.
Especially again if you've lostmoney and you're now trying to
get it back.
Very long road, as I said.
Not to belabor the point.
Hopefully you got the point thatI'm making, and that these are a
couple of tools that you can useto your benefit that are going
to be helpful to you.
The only other point I'm gonnamake is paying attention to what
(22:06):
people tell you.
And what I mean by that is weall know that you can talk to
your neighbor, your betwhomever, a good friend of a
good friend who's gonna give youthe hottest stock tip.
Uh, they're telling you thatthis guy double-tripled their
portfolio for them, andeverybody always paints this big
rosy picture, and you start tothink, hmm, maybe I have missed
(22:30):
a boat.
Maybe I should be investing inXYZ stock or you know what have
you, because everybody elseseems like they double-tripled
their money.
And I want to double-triple mymoney too.
But lots of people, I mean, thefish is a lot bigger than the
one that they actually um pulledout of the lake, right?
So you want to be very carefuland cautious before you do
(22:51):
anything like that.
Because in my mind, you reallyhave to know what you're doing
and is it comfortable for you todo it.
And if it's not, again, trustyour gut and it says, this is
not for me.
If you want to go down the routeof being more conservative than
everybody else, that's totallyfine, right?
You might not get the doubletriple returns, but at least you
(23:12):
know your money's there when youwant it to be there.
And investing is not foreverybody.
I mean, you don't have to investbecause everybody else is
investing.
You invest because you want toinvest.
And you don't have to invest allyour money.
You can invest just a smallportion or whatever amount that
you feel comfortable with.
And you can go low risk, mediumrisk, high risk.
You can have a mix of all that,which is generally a good idea.
(23:35):
But you can be just asconservative as you want to be.
And typically, as you growolder, then you become more
conservative because then you'reabout to start withdrawing money
from your portfolio.
So you want it to be much, muchmore conservative because you
want it there when you need itthere.
Generally, the rule of thumb iswithin five to ten years of your
retirement, then your portfoliois going to be shifting gears
(23:56):
and going down in terms of risk,becoming more conservative again
for those particular reasons.
Generally, you do need somemoney that is still tied to the
stock market itself.
Again, it can be low risk,medium, high risk.
That all depends on what levelof risk and how it's defined for
you and maybe your financialadvisor.
But let's say you do have somemoney in the S P 500, and what
(24:20):
that really helps to do in termsof your portfolio is make sure
that it helps to keep pace withinflation.
If your portfolio is in a very,very conservative mix, let's say
it's in certificates of deposit,even in times like today, CD
rates are still relatively high.
Are they going to get you a 10%return on your portfolio
overall?
(24:40):
Probably not.
But again, you know your money'sthere.
We've all heard stories aboutpeople, you know, back in the
1930s, and you know,great-grandmother always kept
all of her money in themattress, and she never, you
know, trusted anybody with hermoney, and she just saved it,
and she had a bunch of moneythen when she passed away,
right?
My only caution there is if yourmoney's all on your mattress and
(25:02):
your mattress catches on fire,then what do you have?
Burnt paper or whatever it'smade out of.
But all I'm saying is we don'treally want to go down that
route route, but we understandthe principle behind it.
And that's just saying be asconservative as you want to be
when you need to be conservativeand be aggressive, like in your
early years, because you cantake the risk, and if the market
(25:23):
goes south and you have time torecover.
As you get older, you don't havethe luxury of time any longer.
It's starting to work againstyou, and then that's okay
because again, if you'restarting to withdraw on your
portfolio, that's a whole reasonthat you started saving and
investing to begin with, becausenow you need your money.
Same thing, like I said, withthe credit score, is you've
worked hard at making it gettingit to the level that it's at, so
(25:46):
you have good credit, so you canget the best interest rates when
you do take out a loan, personalloan, credit card, home equity,
auto loan, whatever it is.
Then again, because your creditscore is high, then you get the
better rates than somebody whosecredit is not so great.
And you don't want to be in thatposition of having not so great
(26:07):
credit because that's harmful toyou, costs you money, and it
takes a long time to rebuildyour credit back up, even if
it's no fault of your own,right?
Like somebody has misused youridentity and they did all sorts
of nefarious things, and nowyou're paying the price.
And it could take seven to tenyears to get this cleared up for
(26:27):
your for you, and that's just avery, very long time.
Again, you might not even havethat.
And especially as you age andyou're older, then we all know
that there's elder abuse, elderfraud, and it's so unfortunate
because I mean, again, I canspeak from firsthand experience
that when your parents age, evenyour grandparents, whomever you
(26:49):
take care of or you're close to,and you see them being taken
advantage of, it's just soinfuriating infuriating because
you know that they're slippingmentally and they're trustwort
they're trusting people, andthey don't realize that they're
going to be taken advantage of.
And I could go again into manystories of how this has
(27:13):
happened, and maybe I'll do thatas a companion post if you go on
to pinkmoneypodcast.com, thenyou can take a look at some of
the things that posted out therein the blog and in the companion
posts, and also I'll justmention it hasn't anything to do
with this per se, but you cantake a look at Jerry's playlist
(27:33):
too.
So there's my little plug for mywebsite.
Anyhow, I think that's prettymuch it.
And if you have any questions,you can uh drop me a line and
you can ask me a question andI'll respond to you.
Or if you need help withsomething, let me know and I'll
do my best to give you a hand.
And other than that, you have agreat day.
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The Burden
The Burden is a documentary series that takes listeners into the hidden places where justice is done (and undone). It dives deep into the lives of heroes and villains. And it focuses a spotlight on those who triumph even when the odds are against them. Season 5 - The Burden: Death & Deceit in Alliance On April Fools Day 1999, 26-year-old Yvonne Layne was found murdered in her Alliance, Ohio home. David Thorne, her ex-boyfriend and father of one of her children, was instantly a suspect. Another young man admitted to the murder, and David breathed a sigh of relief, until the confessed murderer fingered David; “He paid me to do it.” David was sentenced to life without parole. Two decades later, Pulitzer winner and podcast host, Maggie Freleng (Bone Valley Season 3: Graves County, Wrongful Conviction, Suave) launched a “live” investigation into David's conviction alongside Jason Baldwin (himself wrongfully convicted as a member of the West Memphis Three). Maggie had come to believe that the entire investigation of David was botched by the tiny local police department, or worse, covered up the real killer. Was Maggie correct? Was David’s claim of innocence credible? In Death and Deceit in Alliance, Maggie recounts the case that launched her career, and ultimately, “broke” her.” The results will shock the listener and reduce Maggie to tears and self-doubt. This is not your typical wrongful conviction story. In fact, it turns the genre on its head. It asks the question: What if our champions are foolish? Season 4 - The Burden: Get the Money and Run “Trying to murder my father, this was the thing that put me on the path.” That’s Joe Loya and that path was bank robbery. Bank, bank, bank, bank, bank. In season 4 of The Burden: Get the Money and Run, we hear from Joe who was once the most prolific bank robber in Southern California, and beyond. He used disguises, body doubles, proxies. He leaped over counters, grabbed the money and ran. Even as the FBI was closing in. It was a showdown between a daring bank robber, and a patient FBI agent. Joe was no ordinary bank robber. He was bright, articulate, charismatic, and driven by a dark rage that he summoned up at will. In seven episodes, Joe tells all: the what, the how… and the why. Including why he tried to murder his father. Season 3 - The Burden: Avenger Miriam Lewin is one of Argentina’s leading journalists today. At 19 years old, she was kidnapped off the streets of Buenos Aires for her political activism and thrown into a concentration camp. Thousands of her fellow inmates were executed, tossed alive from a cargo plane into the ocean. Miriam, along with a handful of others, will survive the camp. Then as a journalist, she will wage a decades long campaign to bring her tormentors to justice. Avenger is about one woman’s triumphant battle against unbelievable odds to survive torture, claim justice for the crimes done against her and others like her, and change the future of her country. Season 2 - The Burden: Empire on Blood Empire on Blood is set in the Bronx, NY, in the early 90s, when two young drug dealers ruled an intersection known as “The Corner on Blood.” The boss, Calvin Buari, lived large. He and a protege swore they would build an empire on blood. Then the relationship frayed and the protege accused Calvin of a double homicide which he claimed he didn’t do. But did he? Award-winning journalist Steve Fishman spent seven years to answer that question. This is the story of one man’s last chance to overturn his life sentence. He may prevail, but someone’s gotta pay. The Burden: Empire on Blood is the director’s cut of the true crime classic which reached #1 on the charts when it was first released half a dozen years ago. Season 1 - The Burden In the 1990s, Detective Louis N. Scarcella was legendary. In a city overrun by violent crime, he cracked the toughest cases and put away the worst criminals. “The Hulk” was his nickname. Then the story changed. Scarcella ran into a group of convicted murderers who all say they are innocent. They turned themselves into jailhouse-lawyers and in prison founded a lway firm. When they realized Scarcella helped put many of them away, they set their sights on taking him down. And with the help of a NY Times reporter they have a chance. For years, Scarcella insisted he did nothing wrong. But that’s all he’d say. Until we tracked Scarcella to a sauna in a Russian bathhouse, where he started to talk..and talk and talk. “The guilty have gone free,” he whispered. And then agreed to take us into the belly of the beast. Welcome to The Burden.