When we help clients develop their investment strategy, we always emphasize that
higher returns are typically accompanied by higher risk. It is important to keep this fact
in mind when considering new investments that seem to provide an unusually good
return.
A case in point that illustrates how important this is, was published in the Sarasota
Herald Tribune on March 4th, 2008. Principles of a Sarasota Florida investment firm
have been accused of advertising high-return CDs in the newspaper as a come-on to
gain the confidence of investors. Instead of selling the CDs, they steered customers
into legitimate annuities that paid on time (and which provided high commissions). After
several annuity payments were received, the Sarasota advisors then sold fraudulent
investments to the happy annuity investors. One of the individuals involved has bilked
nearly 380 elderly Floridians out of about $35 million.
Another example that has impacted Michigan investors, illustrates another approach to
be wary of. Investment seminars are a common way for investment advisors to acquire
new clients. Often, a nice lunch or dinner is offered at a well-known restaurant. Several
years ago my wife and I received an invitation to a seminar at a nearby restaurant. One
of our friends had mentioned that he had attended an earlier seminar by the same
advisor. We decided to attend to see what the individual had to offer. It was a fast-
paced presentation with slick slides and humor. There was little time for any in-depth
questions. We were reminded of the loud car commercials you often see on TV.
What was even more interesting was the fact that his literature stated that he had been
a member of the Certified Financial Planner® (CFP) Board of Standards. I thought that
to be a bit fishy since he didn’t claim to be a CFP practitioner. After checking to see if
he was listed on the CFP website, it was clear he was misstating his qualifications. I was
not surprised to learn later that the individual had been named in an investment scam
lawsuit and was under investigation. Investors had been taken in a “Ponzi” scheme not
too different from the Florida example outlined above. Many of his clients reportedly lost
their life savings.
It’s very important to determine the background and qualifications of anyone you trust
with your money. If it sounds too good, it most likely is. As the old saying goes: “There’s
no such thing as a free lunch!” (Or a free dinner, for that matter)
David C. Patterson, CFP® and Erin Patterson, CFP® are the owners of Patterson Advisors, LLC, a fee-
for-service-only financial advisory firm. Patterson Advisors, LLC is a Registered Investment Advisor,
registered with the State of Michigan, helping clients in Waterford, Clarkston and Royal Oak, Michigan
as well as other Oakland County, Michigan communities . Visit www.pattersonadvisorsllc.com for more
information or call 248-674-2108.
Published in the Oakland Insider, March, 2008,
If It Sounds Too Good, It Probably Is
By David and Erin Patterson