How to Know Your Investment Advisor Isn’t the Next Bernie Madoff

by | Aug 28, 2013 | Asset Management, Podcasts

How to Know Your Investment Advisor Isn't the Next Bernie MadoffIn this week’s Mullooly Asset Management podcast Tom and Brendan discuss how to know your investment advisor isn’t the next Bernie Madoff. Tom explains how he expects new clients to question him about this exact topic. Ever since the whole Madoff story came out in 2008 it’s been a real fear for most investors. If you haven’t figured out how to know your investment advisor isn’t the next Bernie Madoff yet, you need to listen to Tom’s tips in this podcast.

Brendan asks Tom what investors can do to stop frauds like Bernie Madoff from tricking them? Tom points out several things that should be an immediate red flag to any investor. Pay close attention to your investment returns. Bernie Madoff returned the same percentage for his clients every year, regardless of market conditions. This is nearly impossible to do, and should have made clients suspicious. Seeing an identical return every year is not normal.

Tom explains that Bernie Madoff actually owned a brokerage firm and an Investment Advisory firm. This is also strange, and should have been a red flag to investors. Here at Mullooly Asset Management we are an Investment Advisory firm. We use different discount brokers, like TD Ameritrade and Charles Schwab, to place trades for clients. This means that when a client wants to invest more money, they write a check to the brokerage firm where their account is, not Mullooly Asset Management. Bernie Madoff’s clients never knew if their money went into the Investment Advisory firm or the brokerage firm because the check was written to Bernie Madoff either way. They also had no way to log in and see their account and its activity online. Our clients at Mullooly Asset Management have access to their accounts 24/7, and can always see what is going on inside of them.

Before you start working with any investment advisor you should begin by asking them how you can trust them with your money. The client-investment advisor relationship involves a lot of trust. Get this topic out in the open. Tom expects to hear this from new clients, and other advisors should as well. If you still need some more tips on how to know your investment advisor isn’t the next Bernie Madoff listen to this week’s podcast!

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