From worrying about banks and a financial meltdown, investors are now wondering if they can trust the person investing their money.
In this year of shocks, investors were dealt another a little over a week ago. Someone considered one of the nation's elite money managers, Bernard L. Madoff, reportedly confessed that he misled investors for years about the money they were making.
The $50 billion firm collapsed, allegedly wiping out funds of supposedly savvy investors - multimillionaires, colleges, foundations, brokerage firms and hedge funds. The clients, many of whom had done social gymnastics to get into his fund, may have nothing.
The situation serves as a reminder that investors need: Don't take on a broker, adviser, money manager or hedge fund without thorough checking.
Here's what insiders say you can do to protect yourself:
* Avoid safety in numbers.
Seeking the easiest approach possible, many busy investors turn to an adviser simply because a friend has been happy with the person. But people can be happy for the wrong reasons. Madoff supposedly delighted clients with seemingly consistent returns, apparently avoiding the downturns in the market.
You might not be able to protect yourself from a masterful fraud, but most investors fail to do the simple checks that will show whether the person or firm has been in trouble. Go to the Financial Industry Regulatory Authority at FINRA.org or Adviser Info.sec.gov.
Also keep in mind that anyone can call themselves a financial planner. Financial planners with the certified financial planner designation or members of the National Association of Personal Financial Advisors have more training than others.
* Snobbery might not make money.
Remember Groucho Marx's line about not wanting to belong to a club that would have him as a member?
Investment crooks tend to play on that mentality, according to Billy Proceda, who investigates fraud in bankruptcy cases. There was an aura of exclusivity around Madoff. People allegedly joined clubs to try to be close to him and others who could get them into his fund.
"Be skeptical rather than thinking, 'I'm so lucky he'll take me as an investor.' Don't let someone's charisma or people surrounding him blur your vision," Proceda said.
