Freaked out by watching American Greed? Financial advisors- chime in here if you can!

[Anonymous]

Ive been watching episodes of American Greed, and its really sobering.

Much like watching ID and stories of crime, you end up feeling like "that could have been me/could be me someday".

Right now I have no savings for anyone to steal, but I want to guard against being in anywhere near the position any of these people end up when I start building a savings and investments.

Specifically I watched the episode about Alan Stanford, who was an unbelievable con man turned banking mogul who masterminded an impressive and devastating ponzi scheme. Two brokers who had worked there a month saw what he had been doing and turned him in. People lost EVERYTHING. And these were people whose brokers, often brokers who were their brokers for years before said brokers got lured in by Stanford and his bogus bank, assured them that Certificates of Deposit were as safe as it gets. Stanfords bank offered a percentage point or two above industry average for CD's on the claim that they could do this because they "ran lean", and had "not much cement on the ground". Well nothing could have been further from the truth and he spent millions upon millions of other peoples money on homes, boats, you name it. At one point he had an estimated net worth in the billions.

How can any of us protect ourselves and/or our trusted brokers from not being tricked? There must be SOME way to at least tip the odds in our favor that we wont end up like these poor victims.

My guess is: deal with brokers that only deal with established institutions?

Remain super conservative in your decisions?

But these people did that, for the most part.

Would a broker that moves from place to place be a red flag?

Anyone have any expertise to add to this?

[Anonymous]

Don't turn your money over to a stranger.

[Anonymous]

Part it of it comes down to the old addage - "If it's too good to be true, it probably is."

A few percentage points above the expected/typical? Sometimes we need to be more skeptical and not just think about making a bunch of money quickly.

[Anonymous]

Well, in the abovve case, all investors did NOT hand their money to strangers but rather to their trusted brokers.

The brokers were taken in, in this case, but remember this guy was by that time established and trusted. Its just that he should not have been.

Also noone was getting richer quicker. The whole idea of the CD's was to keep them for the duration. The addtitional point was a claimed average.

Im looking for advice of a more sophisticated type of scam where there arent obvious red flags. Madoff fooled a lot of people, and so did this guy.

[Anonymous]

You are looking for a garauntee that no one can give you. Fraudsters are out there and some of them are very good at what they do. All you can do is ask questions, gather information and if something seems too good to be true... it may be.