Why Is Financial Fraud Prevalent and Difficult to Guard Against? With Bob Carlson And Eric Lutton


Announcer: Meet Jimmy, a convicted con-artist.

Jimmy: These are dangerous people you are on the phone with, okay. Make no bones about it I am a dangerous person on the telephone, if I choose to be fraudulent in my practices’ there is nothing that’s going to stop me from taking lots of money from people period, the end.

Speaker: I don’t know how people sleep at night doing this kind of thing.

Announcer:  And that is Jimmy the con man in a tell-all interview with A.B.C. News. Unfortunately, there are a lot more Jimmy’s out there and as he said absolutely nothing is going to stop them from taking your money including your entire life savings if they can. Nothing that is except for you and being aware and educated about financial scams and schemes, it’s now time once again to tune out the hype and focus on the facts. Facts that matter to you, the income generation. Let’s get started, get ready to separate reality from myth.

Male Speaker 5: But David Scranton says hey not so fast.

David: How does it affect the market, how does it affect the economy? Thanks to efficiencies and new technology and a staff of veteran analyst and portfolio manager. Sound income strategy tries to set new standards and bring institutional style investing to your portfolio.

David: Hello, I’m David Scranton you know here in sunny Southern Florida we’re certainly no strangers to new stories about creative crooks in their latest underhanded dealings. But unfortunately we’re not alone, millions of Americans across the country fall prey to scams and fraud each and every year. Victims are often left feeling betrayed, their trust in others in their own judgment completely shattered. Fraud crimes can impact the financial security of families and individuals at virtually any stage of life, but for victims who are retired or close to retirement age the results are absolutely devastating. And today, we’re going to focus on the support and topic and tell you how to protect yourself from these frauds and scams and helping us will be our special guest Bob Carlson, author, and editor of the retirement watch. But first, let’s talk about why financial fraud is so prevalent and so difficult to guard against in this modern age. You know if you think about it, fraud itself is as old as human nature one of the first recorded incidents occurred in the year three hundred B.C. when a Greek merchant concocted an elaborate insurance scam. And scams have only gotten more elaborate and more sophisticated since then, for example, the well-known Ponzi scheme is named after Charles Ponzi. Who ripped off fellow Italian immigrants in Boston in the 1920’s? And as saving for retirement became a common part of American life after the Industrial Revolution, older Americans increasingly became the preferred targets of scam artists. Scammers know that older Americans are more likely to provide a big payoff why? Because they’ve had the time to accumulate more assets and that’s why Florida with its high population of retirees ranks at the top of the list nationally when it comes to scams and frauds. It’s also why it’s so important to be aware of potential scams as retirement approaches, for most Americans those accumulated assets represent their entire life savings. And as the con man, Jimmy, confessed in that A.B.C. interview scammers have no ethical qualms about wiping you out completely. Most of us want to believe that we’re too smart, we’re too sophisticated to fall victim to these scammers. But, unfortunately, the criminals who specialize in financial crimes are often very smart and sophisticated themselves and they know how to manipulate the system to give the appearance of credibility. Not just the victims but the regulatory agencies that are supposed to protect consumers and investors against such scams, everyone remembers Bernie Madoff of course, who managed to run the biggest Ponzi scheme in history for years before being caught by the F.B.I. in 2008. Prior to that, the S.E.C’s Securities and Exchange Commission had conducted multiple investigations into Madoff’s business practices. But none had uncovered the massive fraud that eventually robbed investors of nearly sixty-five billion dollars, of course, many billions were also lost to investors and other recent fraud cases from World Com to Enron and Rafkel. These were all major companies operating in plain sight and committing fraud, so the question becomes have new safeguards really been put in place in recent years? Of course, some have but at the same time technology has continued to evolve along with the means by which consumers commonly communicate and interface with businesses and thus with each other. For scammers and con artists are just the kinds of changes that create new avenues and opportunities for deception, increasingly even older Americans have become comfortable with shopping, banking. Doing just about everything else online, it’s pretty much become a necessity in the modern age but as we learned with the security breach at Equifax for example, and as well some other recent high profile cases new conveniences do indeed come with new risks. Access to your personal information by computer hackers is pure gold to scam artists, the more information they have about you the more likely they’ll be able to approach you as a trusted source to trick you in so many words. That’s one reason Internet scams are among the most common current ways for con men like Jimmy, to rip you off but there are plenty of others and we’ll talk about some of those in just a bit. And about some of the psychological factors that might be working against you when it comes to protecting your money, being aware of those factors is one sure way to help prevent yourself from becoming a victim. There are others and we’ll also discuss those just a little bit later in today’s show right now I’d like to welcome our first guest Bob Carlson. Bob Carlson’s editor of the monthly newsletter and website called Retirement watch, the first publication to cover all the financial aspects of retirement. His latest book is the revised edition of The New Rules of Retirement which was originally published in two thousand and four, he has written numerous other books and reports including The New Rules of Estate Planning and securing your lifetime stream of income. I’m going to have to read that one myself, he has appeared on many national television, radio programs and we’re happy to have him with us today. Bob, welcome to the show.

Bob: Thank you. Thank you for having me.

David: First, tell us please a little bit about the retirement watch, for those who might not be familiar with it.

Bob: Well, as you said it’s a research the monthly newsletter, it covers all the financial aspects of retirement, retirement planning any problem you could run into from estate planning. Managing your IRA’s, reducing income taxes, how to evaluate annuities, whether or not to buy them, Medicare, long-term care pretty much any financial issue you could run into in your retirement or your retirement planning. I try to cover it and give people some independent research and advice on it.

David: Now my question is what motivated you to kind of take this on as a passion in your life you know if you think about it and I know in your experience you would actually… had overseen some very large state pension funds and so on. So you must have seen some horror story, seen some people make some common mistakes and what are some of those mistakes that you’ve seen repeatedly that perhaps motivated you to make this you’re your passion in life over the last fourteen years?

Bob: Well I started out doing taxes, I was trained as an attorney in a C.P.A. so I started out with income taxes and I was doing a newsletter on taxes and I realized suddenly, I was getting a lot of questions about IRAs and retirement plans and how to handle distributions from them. And as I looked around I saw there was no good source I could recommend to people so the more I concerted it the more I realized there was a kind of an information gap for retirement financial information particularly both IRA management and estate planning. So I stepped into that with a newsletter and we continue to see a lot of the very common mistakes people make particularly with their IRA’s when it comes to distribution time or leaving it to their heirs. They make frequent mistakes, so when they’re trying to take money out or managing their IRAs doing the estate planning part of it money gets left on the table.

David: Sure, sure. But just for a minute though focusing on this concept of the dangers of scams and pitfalls and everything else in planning for retirement you know do you think that a lot of people underestimate the dangers of scams and frauds? Is this something you address periodically in retirement watch? Talk to us about that.

Bob: Yeah, I do. Research has shown that the people who are most likely to get caught in a scam in retirement are those who don’t fit the traditional profile, the traditional profile is you have someone very old living alone. A very reduced cognitive function, who falls for some kind of scam, now, these are the people who are most likely to be a victim of financial abuse. But scams actually, the research shows are perpetrated on other types of people, actually, people who are very confident, who have a lot of their cognitive function and who think they’re very unlikely to be victims of scams are actually the ones who are more likely to be victims. They have… because their confidence is high, they have their guard down they’re more open to new ideas and so these are the people who actually are more likely to fall for scams in this stereotypical profile.

David: You know let me ask you this getting away from the scam for just a minute you know I find and I want to see if you find this too is that, for example, a lot of do it yourself, investors. Fall into the same trap a lot of people some… there are some people that really have great abilities, great knowledge of markets and they do it themselves. They do a great job but there’s a lot of people out there that do it themselves that have… that are overconfident in their ability to manage their money just like you mentioned a few minutes ago. Some are overconfident in their ability to avoid scams and if they’re overconfident too in their own belief that they can avoid financial losses and then all of a sudden a big bear market comes. They get worse sometimes, I mean have you seen that as I’ve seen that with a lot of do it yourself investors.

Bob: Right confidence is a big factor in determining who’s the most likely to be scam ARP has done a couple studies over the years, some other people have and the likelihood of being subject to a scam is highly correlated with people assessing themselves as being very good with their finances and their investments. The higher someone’s conference level is about their financial knowledge and their financial ability. The more likely they are to make snap decisions to fall for one of these scams so if you’re feeling confident, you’re feeling like you’re not likely to be a victim of a scam that’s kind of a red flag.

David: Yeah.

Bob: You should throttle back a little.

David: Confidence is a great quality in life but sometimes it can work against you, I see that with fellow pilots too that are too confident and they scare me sometimes but Bob stick around. We’ll be right back and you stay with us too we’ll be right back with more from Bob Carlson. If you’re near or in retirement head over to the income generation dot com and download your special report written specifically for the needs of the income generation. Again those born before one thousand nine hundred sixty-six. I’m David Scranton and you’ve been watching the income generation.

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David: So if you’ve watched the show in the past or read my book Return on principle, then you already know that I believe protection should be the number one priority. For investors at or near retirement, a major financial loss can occur in any number of ways, it can result from simply having the wrong asset allocation for your stage of life and circumstance. In other words, from focusing too much on portfolio growth and not enough on security and income, it can result from underestimating the possibility of a major healthcare event. And unfortunately, yes, it can also result from falling victim to a financial scam or fraud so making protection your top priority helps decrease the odds of a major loss regardless of the cost. Why because it ensures that you’re playing good financial defense, neglecting or minimizing financial defense is one of the most common and costly mistakes retirees make with their money today. When it comes to defending against scams and fraud the first step is to recognize early on that you might be involved in one, we’ve already mentioned Internet scams is among one of the most common types of deception used to target older Americans today. And here are some of the others according to the National Council on Aging, investment scams, we already talked about Bernie Madoff but there are plenty more just like him out there. And as we also mention there may very well have proper credentials and they might seem legitimate but be cautious, thoroughly research any agency or individual before working with them. And as always remember those sage words of wisdom if it sounds good… too good to be true it probably isn’t true. For example, common signs of a Ponzi scheme are that Ponzi schemes typically offer unusually high short-term rates of return or consistent returns. Such as eighteen straight months without a loss, a short con artist could probably make that actually sound credible and psychologically face it, we’re all hard-wired to want to believe extravagant claims. Even when they don’t pass the sniff test, which we’ll talk about further later in the show but again beware, and by the way when you’re focused on income instead of growth. The good news is you’re probably a lot less likely to fall victim to something like a Ponzi scheme why? Because massive portfolio growth is usually what these Ponzi schemes falsely promise, now we’ve already mentioned Internet scams. But for many con artists, the good old fashioned telephone is still an effective and preferred tool to rip you off. Baby boomers are in many ways not just a T.V. generation, but were also the telephone generation. Traditionally we are very comfortable sharing information and conducting business over the telephone, it’s just something that we’ve grown up with and according to statistics baby boomers make twice as many purchases over the phone as the national average. Scammers take advantage of this with cold calls and telemarketing schemes that managed to fool millions and millions of Americans each and every year. And with no face to face interaction and no paper trail, these types of scams are very difficult to trace so here’s the bottom line, if you don’t recognize the phone number and or the content of the call seems even remotely suspicious hang up. Another of the most common types of scams targeting older Americans are Medicare and health care insurance scams, perpetrators may pose as Medicare reps to get you to give them your personal information. Which again, is gold to scam artists or they might provide bogus services at makeshift mobile clinics and then use the personal information they’ve provided to build Medicare and pocket the money. Scammers know that increasing medical costs, health care costs are an ongoing concern for many people saving for retirement, so what do they do? They take advantage of it. It’s best to stick with known and trusted medical sources like your primary care physician whenever possible and finally beware of homeowner and reverse mortgage scams. Scam artists are well aware that people of a certain age are more likely to own their homes which is obviously one of the most valuable assets most people have. There are any number of schemes a con artist might use to target an older homeowner looking to sell, refinance or make improvements, the best way to protect yourself is to be aware of these schemes. And again to thoroughly research any firm or any individual that you expect to do business with. Beyond that never signed any contract or document without a legal review and never make any transfer of ownership without also being released of all financial liability we’re going to share more tips on how to make sure your defense to financial strategy includes various ways to protect against scams and fraud in just a minute. And right now it’s time to welcome back our new friend. Bob Carlson you know it’s a great point you make Bob. Because it’s you know I know your background is a C.P.A. so you’re very prime mathematical by nature, a very left-brained but you made a very important right brain point that what emotions. What overconfidence can do to hurt somebody and I hinted toward it, I see that even in flying you know is a lot of people who like myself are business owners that are pilots that fly airplanes. And you know some of them end up being just super, super confident and they’re the ones that scare me the most, those are the ones I never want to get into a cockpit with because they think it can never happen to them. And you know the good pilots know it could happen any time, I’ve got to be ready for so I thought that was really a wonderful point. But I want to ask you about tax scams and frauds you know, you come from a tax background and of course now there’s this whole thing out there where you get messages on voicemails, on answering machine saying you know this is the IRS calling you must call us in twenty-four hours or we take pity on you. What’s going to happen, I’m sure you’ve heard about some of these things, how can they get away with this when these scams are that broad brush?

Bob: Yeah, I have in fact. I’ve gotten some of those calls myself.

David: Me too.

Bob: There are several ways to get away with it, one of them is technology they are calling from overseas, but they’re able to do what’s called a caller ID spoofing and they can make you think they’re growing from right next door the local IRS office. So the caller ID which is supposed to protect people actually works against them because people have figured out how to fool the caller ID, to make it look like it’s coming from the U.S. government phone or an IRS phone. So that’s one way they do it.

David: So tell our viewers though if they get a call from somebody who’s at the IRS for example, who says they’re at the IRS. How can they determine whether it’s real or not?

Bob: Well, first the IRS will not make an unscheduled phone call to you if they’re going to tell you, you owe them money or they want to audit your taxes they’re going to send you a letter.

David: Heck, it’s hard to get them on the phone when you try to call them, so I’d have to imagine they’re not going to make an unscheduled call.

Bob: Right it’s not going to be an e-mail, it’s not going to be a phone call unless you call them ahead and say will you please have someone call me. So if you’re getting a phone call from someone who claims they’re from the IRS they’re not, you can pretty much just hang up on them. And even if it is someone from the IRS, they’re not going to take an action right away they understand what people are thinking and why people are skeptical. So they’re going to send you a letter again anyway, so if someone is calling you and saying they’re from the IRS if you’re not expecting them if you haven’t been having to back and forth with them already, then it’s a scam.

David: Great advice. Great advice you know it’s… the IRS always sends letters first and it’s amazing smart people there is actually someone in our office several years younger than myself. Who’s a real smart guy almost fell victim to that kind of scam got really close and then all of a sudden his senses start to go off saying something just isn’t quite right here so. Bob, we will take one more commercial break stay with us, I hope we know each other right now well enough after talking for eight minutes or so together. I hope we know each other well that I can ask you a personal question in our next segment, can I do that?

Bob: Yeah, we could give it a try.

David: All right let’s give it a try then and you stay with us too we’ll be right back with more from Bob Carlson. If you’re near or in retirement head over to the income generation dot com and download your special report written specifically for the needs of the income generation. Again, those with born before one thousand nine hundred sixty-six. I’m David Scranton and you’ve been watching the income generation we’ll see you all next Sunday. If you’re near or in retirement head over to the income generation dot com and download your special report written specifically for the needs of the income generation. Again, those born before one thousand nine hundred sixty-six. I’m David Scranton and you’ve been watching the income generation. Nice car? You know I love cars, but I have to admit I associate the Ferrari with a very bad episode, a very bad time in my life. The time that I fell victim myself to a financial scam, it was very early in my career and I was still in my twenty’s. I had an old high school friend who did a very good job of giving the appearance of being a highly successful businessman actually a builder. He wore nice suits, he ate at nice restaurants and yes he drove around in you guessed it a Ferrari. He was also a smooth talker, who made himself and his operation sound completely credible. Plus he was somebody that I’d known from years past so someone whom I naturally assumed, I could trust well to make a long story short I trusted him enough to invest heavily in his business. Only to end up getting taken for every cent that I had back then and actually more, you know everything about him the clothes, the car, the sales pitch was a deception. And I wasn’t the only person who fell for it and got ripped off but what bothers me the most about it to this day is that on some level from the very beginning I knew it just didn’t feel right. Something about his promises and his whole persona just didn’t pass as I like to say the sniff test, and yet I ignored those protective instincts and let myself get taken. The good news is that I learned a hard lesson and prevented it from ever, ever happening again in my life. In fact, one thing that we as old-timers have going for us when it comes to protecting ourselves against scams and schemes is an experience. We’re more apt to recognize a phony pitch for what it is because we may have heard it before and were less likely to ignore our instincts when something simply doesn’t pass the sniff test. But experience alone often isn’t quite enough to protect us and there is simply a cold hard fact of nature that these scams exist all around us and even smart sensible people with loads of life experience end up making poor choices. Why? Because the two fundamental emotions that drive financial decisions, fear and greed you probably heard me discussed it before as it relates to investing most people simply aren’t hardwired to be good investors. Why? Because it requires being able to override those basic emotions on a regular basis, it means being able to buy when the markets are low and being driven by fear. And if so when the markets are high you’re being driven by greed, for most people their own greed impulse kicks in during a high market and they want to stay put. Then their own fear impulse kicks in when the market’s falling near rock bottom and that’s when they pull out. That’s why buy low, sell high is a simple principle but for most people, it’s not easy in practice, why? Because of human nature buy low, sell high is simple but not easy. But those same instinct and emotions are what make us all potentially vulnerable to financial scams regardless of our age. Regardless of our experience and regardless of our ability to sniff out deception, con artist will typically play upon the instincts of greed or fear or often both to try to get you to make impulsive decision before your protective instincts have a chance to kick in.

Male voice 6: (Unclear 27:09) doesn’t sell stock at the rate MSC is going for it, Dr. Jacobs. We’re talking a very high volume here.

Dr. Jacobs: Well, I still have to run it by (unclear 27:15).

Male voice 6: That’s great doc if you want to miss yet another opportunity here and watch your colleagues get rich doing clinical trials then don’t buy a share and hang up the phone.

Dr. Jacobs: Well hold on a second now, I didn’t say that I just want to talk about it some more.

Male voice: Honestly doc, I don’t have the time.

David: That’s me from my bodybuilding days, no it’s not, that is a scene from two thousand and nine’s the boiler room and it illustrates exactly how a scam artist will manipulate the fear and greed instincts simultaneously. By telling a potential victim that he stands to make a killing greed, but that if he doesn’t act right now he’s going to miss out fear. Of course, what you just saw was a Hollywood depiction but it does reflect a cold hard reality which is that every single year millions of otherwise smart savvy investors. From business owners to doctors as shown in the film are taken by scammers whether it’s an investment scam, a health care scam, a telemarketing scam or an internet scam. If you are at or near retirement you are more likely than a younger individual to be targeted why? Because you simply represent a bigger payoff potential for the scam artists and no matter how smart or experienced you may be simply assuming that you could never be fooled definitely does not constitute playing smart financial defense where scams and frauds are concerned. Let’s face it, we’re all somewhat vulnerable to being controlled or manipulated by fear and greed instincts which is why it’s important to take other more tangible steps to protect yourself and to take action if you become the victim of a scam. Some people are slow or reluctant to do what’s needed to protect themselves or minimize damage after the fact. Either because they’re embarrassed, they’re afraid to admit they were taken in or because they don’t believe that anything could really be done about it. And usually, that’s not true in fact, even many of Bernie Madoff’s victims have since been able to recoup substantial amounts of their losses or are now in the process of recouping those losses. We’ll talk more about specific steps that you can take to protect yourself from both becoming a victim and remaining a victim in just a bit. Right now it’s time to walk him back Bob Carlson. Bob, you know, I…you heard earlier on the show that I basically got naked in front of our entire audience proverbially speaking and told them about a personal experience. Where I was defrauded of over one hundred thousand dollars early on in my career, so I’d like to ask you. Have you ever had a personal experience, where you were defrauded whether it’s a big amount of money, a small amount of money? And how do you feel personally and what did you learn from it?

Bob: Well, I can’t say I’ve been defrauded, but early on when I first started investing I was persuaded to buy some rare coins.

David: And that’s fine Bob, you can always say to our audience that you know I have a friend who bought some rare coins and they’ll buy that one hundred percent so that’s alwaysa a good technique for television.

Bob: So it wasn’t a fraud, the coins and such but you know there’s a high markup on those and the market tends to be a bit manipulated by people and actually it was going up in price and I was ready to sell. And I called the guy up and said okay, I’m ready to sell and take some of these profits he didn’t call back, I actually had to go find another broker to buy them back. And he you know did not give me as much as this other guy indicated they were worth at the time, so I didn’t get out of it what I was expecting and there was a lot of you know cross and markups involved. So I learned a lesson there.

David: So my best guess is you probably don’t own a lot of Bitcoin or cyber currencies either then?

Bob: No, no. I’m sticking with the liquid markets where the prices and on the Internet every day and I can be sure where it’s worth.

David: Stick with the tried and true, a man after my own heart I love it. So in closing today, in thirty seconds or so we have left what are two or three of the most important piece of advice that you have for income generation members. Our loyal viewers and how they could prevent themselves from being scammed or defrauded?

Bob: Well, there’s really three important points one, is don’t make a decision in a hurry, particularly for an older person your decision-making ability is slower than it used to be. So any time you’re presented with an investment idea…

David: So number one, slow down. Slow down, number two.

Bob: Related to that is talk it over with people. If you don’t have a professional adviser you should at least have some you know intelligent, knowledgeable friends or relatives.

David: Number two, your second opinion and I hear the music in my ear so real quick number three.

Bob: And the third one is, if you’re feeling emotions don’t make a decision, you should not make a decision when you’re feeling emotional.

David: Perfect advice Bob. Time flies when you’re having fun thank you for being with us and you stay with us, we’ll be right back with more on the income generation. If you’re near or in retirement head over to the income generation dot com and download your special report written specifically for the needs of the income generation. Again those born before one thousand nine hundred sixty-six. I’m David Scranton and you’ve been watching the income generation we’ll see you all next Sunday. If you’re near or in retirement head over to the income generation dot com and download your special report written specifically for the needs of the income generation. Again those born before one thousand nine hundred and sixty-six. I’m David Scranton and you’ve been watching the income generation. We’ve already mentioned a couple of specific ways to help protect yourself against some of the most common scams that target older Americans today. For example, remember to be very skeptical of telemarketing calls and others from numbers that you simply don’t recognize or from businesses or people you’ve never heard of. Or those that sound remotely suspicious in any way, remember if they’ve managed to gain access to some of your personal information either by electronic means or by some other means. They may be able to use it to win your confidence in spite of your skepticism, but please don’t be fooled with that in mind here’s another important tip to protect yourself against scammers. Perhaps the most important be extremely wary of anyone asking for personal information over the telephone, for asking for personal information online and even in person in certain situations. Most legitimate businesses and institutions will not ask for personal information like an account number, social security number or a home address outside of any official transaction with them. And normally they’ll only expect you to provide these things in person or through some other confidential means, remember if the person on the phone says he works for your bank or for the IRS he should already have that kind of information on hand. So, for example, he knows your home and e-mail addresses but says that he needs your Social Security number it could be that he’s a scammer who’s managed to obtain some of your information. But is now fishing for more a good rule of thumb is to never give out any sort of personal financial information over the phone unless you’re the one who initiated the call in the first place. As the Internet be extremely suspicious of any pop-ups directing you to click on them or take action of any kind. Sometimes just clicking on a link you don’t recognize is enough to give hackers access to your personal information and never click on a link that comes to you in an e-mail or Facebook message from a source that you don’t recognize. And it’s… if it’s from someone that you do recognize, it’s easy to check with them first by phone or text to make sure that’s legitimate. Very often you’re only getting it because your friend has already been hacked, so another good rule of thumb is to never buy anything from anyone who calls or knocks on your door unannounced. It’s always better to ask them to send you some information in writing on whatever offer requests they might be making. Also never make a donation if it requires providing your credit card number or bank account number, finally, never let yourself feel pressured into making a purchase or any kind of financial decision. Whether it’s on the phone, whether it’s online or in person please recognize that if the person is trying to manipulate your fear and greed instincts. He probably doesn’t have your best interests at heart, in fact, he may very well be trying to rip you off plain and simple. And if it does happen, because it does don’t beat yourself up over it, don’t go into despair about it simply take action we’ll talk more about that coming up in just a bit. And now it’s time to bring in our next guest Eric Lutton, Eric is a (unclear 36:55) financial analyst with nearly twenty years of experience in fixed income portfolio management. As chief investment officer of our company Sonicom Strategies, he specializes in actively managing client accounts for maximum value, income and protection. Eric, welcome to the show.

Eric: Thank you for having me, Dave.

David: So what’s your take on what we see here with a lot of our unscrupulous competitors down here in southern Florida you know I’m going to throw myself under the bus here? Our group because not our group, but I mean my area the country I’m from the northeast and I’m going to guess Eric that most of our… Most of the people that come down to Florida that a Ponzi schemes and things are probably from the Northeast.

Eric: Unfortunately.

David: You grew up in the Midwest, so you’re one of the good guys right so it’s a little different.

Eric: We never do that.

David: But you’ve been what… You’ve been working down here for a long, long time and you know why do you think it happens? Why do you think there are so many of them down here in Southern Florida? Is it just the nice weather?

Eric: Well you know I’ve been thinking about that for years being in South Florida and I think a lot of it has to do with there’s an older population that falls prey to scams and frauds all the time. There’s a lot of money down here, there’s families with money and that’s another high-end target so you know the combination the two makes, it right for criminals and fraudsters.

David: And of course, our whole mission at Sound Income strategies is to protect people’s money from financial loss and to generate consistent income. But tell our income generation viewers you know what we do at Sound Income strategies to protect them from scams and from frauds.

Eric: Sure, well for starters a lot of times Dave, as you know some of the people have gotten away with fraud and Ponzi schemes usually custodial funds. They’ll have private investments or things that aren’t public knowledge where we custodian with T.D. Ameritrade as you know reputable firm. Charles Schwab Fidelity, there’s big reputable firms out there but you want to make sure that your assets are custodian under your name with those firms and not some private L.L.C.

David: And essentially that’s what Bernie Madoff did in a lot of the hedge funds if you will is they took receipt of the money themselves, they had one pooled account, they basically created their own statements for clients and as a result. Until they get caught, they can put down virtually anything they want. So Eric, stay with us we’re going to have more when we come back in a moment and you stay with us too we have more words of wisdom from our chief investment officer Eric Lutton in just a moment. Welcome back to the income generation, I’m here with our own Eric Lutton chief investment officer of Sound Income strategies and it just dawned on me, that I was wondering… I’m thinking why are you know looking at the monitor on the side, the camera I’m thinking why does Erick look smarter than me on my own television show? And I realize it’s because he’s wearing glasses so now we switch roles today for this particular block in the show. Actually, I’ll help you out there you go but Eric in all seriousness tell us… tell our viewers you know what we do, we talk about the fraud in scam portion of it and what we advise, in terms of protecting them from that. But tell them in simple words what we do to protect our income generation members from investment wasis.

Eric: Sure. Sure, well the first thing is we talk to people usually people in retirement or near retirement don’t need to have all their assets in the equity market that’s a volatile market. There’s a lot of risks and…

David: There probably should be less than half right?

Eric: Yeah, absolutely and we find a lot of times when clients come to us have the majority if not all of their capital in equities watching it go up and down up and down hoping that they can get out the right time.

David: Yeah and it’s a problem, it’s because people are addicted to the stock market after the eighty’s and ninety’s, the best pool market in U.S history that’s why people like ourselves that got involved in the financial industry in the eighty’s and nineties are rare to be specializing in fixed income. Most people specialize you know in…

Eric: Equities.

David: Stock market, that’s right. So you know what do you tell people when you talk to your personal clients or friends what do you tell them they should be doing to avoid any investment scam or any frauds?

Eric: Well, the first thing I tell them is asked to see clients, if you can meet with current clients of a firm that always works to your benefit. I’ve told them to ask if an advisor’s ever lost a client or they were fired by a client asked for that client try to talk to that client find out why? And if the advisers really shifty then you know there’s potentially a red flag there.

David: Okay, so I gave your glasses back so you’re looking smart again, so in the minute or so we have left let’s talk…you know let’s talk about interest rates. Interest rates are on the way up everybody says that’s a headwind for fixed income, some of the stock market people are saying it’s a bond bubble, it’s a bond bubble don’t invest in bonds right now. In forty-five seconds or so tell our viewers why you disagree with the term bond bubble.

Eric: Well, I don’t think it’s a bond bubble, interest rates will go up. To a fair degree but it doesn’t mean that the income portfolio is going to collapse and have all these horrible losses. And if the interest rates go up too far, too fast the first thing that happens is you get what’s called an inverted yield curve not that we need to go into that today, Dave.

David: But we have many times of previous shows actually.

Eric: Well, good.

David: And I don’t even wear glasses and I was able to talk about that.

Eric: So what could happen is once again then the inverted yield curve you could… that could pop the equity markets very quickly along with the economy so…

David: At the end of the day when you invest in fixed income, it’s called fixed income for a reason you’re investing in a contract that has a maturity date that has a promise date of repayment. So when you talk about bubbles, you can talk about real estate bubble, a commodity bubble, stock bubble but a bond bubble the two words don’t even go together. So Eric, thanks so much for being here with us today on the show, I really appreciate you making the drive up here and you stay with us we’ll be right back to wrap up this episode of the income generation. I’d like to thank both of our guests today for joining us for another episode of the income generation, I’d also like to thank you our new and returning viewers. You know regular viewers of the show know my mantra if you’re retired or you’re within fifteen years of retirement please, please, please make protecting your assets your number one top priority. It’s time to start shifting your focus from portfolio growth to protection and retirement income. Those two things go hand in hand why? Because when you’re focused on investment strategies designated to generate income you’re typically investing in vehicles designed to reduce volatility at the same time. And therefore to better protect you from a major financial loss, but as we’ve discussed on today’s show there are other potential ways to suffer a major loss. Including being the victim of a financial scam as much as we might all like to think we’re too smart or sophisticated or too experience to become a victim ourselves, statistics prove otherwise. Human nature simply works against us when it comes to protecting ourselves against scam artists and no one should ever confidently assume it could never happen to me. Instead, continue to stay vigilant, continue to stay educated and aware of the latest scams and schemes that are being used today, remember that criminals continually adapt their strategies to changes in technology and the culture. Trying to stay just one step ahead of safeguards and potential victims, also protect your private information the best you can and never knowingly provide it to any person or agency you don’t know or completely trust. And lastly, yes I said it before and I’ll say it again be vigilant about backing away from anything that doesn’t pass the sniff test. Please recognize when someone’s trying to manipulate your fear and your greed instincts both. Either one or both together don’t let them, slow the situation down and give your human instincts a time to tap into your own innate protective instincts, your skepticism, your common sense instead. And finally, if you’re ever victimized don’t beat yourself up about it, instead just take action it’s possible you could recover some if not all of those losses. And remember that it’s up to you to recover emotionally and to move forward with an improved focus on your top priority and that is protection. Thanks for watching, if you’re close to retirement and really want to know how to protect and maximize your money it’s absolutely essential that you stay informed and up to date. And again, right here is where you could do it on the income generation, I’m David Scranton. Thanks again, we’ll see next week.




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