There are lot of unscrupulous salespeople out there who are both very intelligent and persuasive. It doesn’t take much to part most people with their money. Majority of investors chase returns with a much higher risk profile than they realize.

A lot of advisors – not to mention clients – still don’t comprehend that any return above and beyond a U.S. Treasury bill yield is taking on extra risk. The whole subprime fiasco resulted from essentially institutions chasing an extra 50 basis points of return on fixed income instruments.

There’s actually a lot of debate going on within private client portfolio management circles that the core holdings need to be extremely conservative. You build have other buckets built for different goals that have different risk profiles.

Anybody going after returns greater than a guaranteed annuity needs to understand they run the risk of losing it all. Will they? Probably not if it’s intelligently invested. The concept of risk and loss is still not being impressed upon clients.

Behavioural finance studies are continuously showing that the true risk tolerance of clients is not matching up with the investments they are in.

I don’t know if Preet included this note. I take the blame fully. It was not anyone else’s fault. I am actually glad we’ve gone through this. Hubby and I believed that all people were truthful, that all people were kind, that scammers didn’t exist. Kind of Pollyanna, but since then we’ve learned that there are ugly-inside people out there, but we choose to believe the best in people. We just don’t give them our money.

I have been making 15% to 20% on my money since this time, so the rates they were telling me weren’t impossible. I’ve just learned that I must be a lot more aware of my money and know what the risks are for a high return.

Thanks for your comments – appreciate them, and your point of view. I cannot really say I’ve countered your points effectively, more of wishful thinking on my part.

Perhaps people should be required to get an investing license, like a driver’s license. It doesn’t have to be a grandiose test, but perhaps something that just identifies the glaring risks like the ones Steve identifies, basic information on how to check if an advisor is registered, common financial fraud schemes, etc…

I can’t really speak to the reader’s letter other than to wish them the best.

Lack of investor education, the bulk of advisors being paid as salesman, and lots of trusting people are but some of the ingredients that make fraud more common that it should be.

How many institutional investors got taken by Madoff? What’s their excuse? Maybe they are just victims and the system needs to protect everyone better.

I just read your story about the Langfords and although I feel for them because they got taken for all their money, I also wonder “how gullible could you be”. You have been in the investment business for a long time and you have to agree with me that these people made many dumb mistakes. First, they bought into a late night infomercial for thousands of dollars. Who does that? Those people are selling you something and are not real financial advisors. Next they gave all their life savings to someone who would buy them one property. Who invests their life savings in one property – particularly one where you don’t get your own appraisal? I can believe that people think investing in one property is less risky than investing in a mutual fund. Next they believe they will get their money back in 3 months. How can this be true if they are buying property? That’s a long-term investment, not 3 an investment for 3 months. How can you believe that you will invest in a property now and sell in 3 months and you will be rich? Lastly, they moved their money to a private company owned by the 3 partners thinking it was within their RRSP. Why would you ever invest money where the cheque is payable to their advisor’s private company rather than the investment company or dealer? That’s exactly what happened in the Earl Jones scam. The problem here is that I don’t know why they needed to invest in this. Both couples profiled seemed to have enough money to retire. Why try to be greedy? That’s what this is all about – greed! Both from the 3 partners who scammed their clients and from the clients themselves.