How Broker Scams Work

Not all financial con artists are found online or at sleazy investment seminars. There are many fraudsters that operate out of broker's offices and hide behind SEC licenses and the logos of major investment companies. These predators masquerade as legitimate brokers but they are really scam artists trying to take your money.
A classic example of a financial fraudster masquerading as a legitimate broker was Bernie Madoff. At the height of his career the notorious Ponzi scheme operator was actually sitting on panels that advised the SEC. If that wasn't bad enough he was often quoted by the financial media as an authority.
Unfortunately Madoff was only one example of such a predator. Brokers at many large firms including Securities America (formerly part of Ameriprise), Banc of America Securities (now part of Merill Lynch), Wells Fargo and other major brokerages have been caught running scams. Securities America and its former parent Ameriprise settled a lawsuit for $80 million filed over allegations that Securities America brokers had invested retirees' money in Ponzi schemes.
How to Spot a Broker Scam
Fortunately it's actually fairly easy to spot a broker scam because brokerage fraudsters use the same shoddy tactics as other financial predators. In many cases there is little difference between their cons and those run by other hustlers.
The first and biggest sign of a scam is that a broker or financial advisor tries to steer you away from regular or traditional investments. He or she tries to claim that you will not make enough money out of stocks, mutual funds etc. Then he or she introduces some unusual or exotic investment that will make piles of money. They will try to push something unusual like promissory notes, derivatives or private placements on you. In the scam at Securities America investors were encouraged to buy accounts payable investors issued by something called Medical Capital. Medical Capital was a blatant Ponzi scheme that was later shut down by the Securities and Exchange Commission (SEC).
The next sign is that the broker or advisor makes extraordinary or unusual claims about the "investment." He or she will promise an unrealistically high return or claim that the offering is totally risk free. One sure sign of a scam is a return that exceeds 13% or something that will give you a high return on a permanent basis. There is no way to guarantee such a return and no such thing as a risk free investment.
Variations of the Broker Scam
There are some other tricks that brokerage fraudsters will use to try and convince their scams are real. One common tactic is to steer the investor to something outside the brokerage. In some cases brokers will act as front men for con artists they will try to spot suckers and steer them to financial seminars and other hunting grounds for financial predators.
Another tactic such criminals will use is to always pay a high return. They get the money they are paying you from their other victims. This is called the Ponzi scheme and it was Bernie Madoff's favorite tactic. Always be leery of anything that should not be paying out and will.
Protecting Yourself from Broker Scams
Questions are the best protections that you have from broker scams. Always question everything that financial advisors and brokers say. Ask for the prospectus which describes everything about the investment. Financial professionals are required to give you this by law. Ask how the investment works and how it makes money, generally predatory brokers like other hucksters are unable to answer such a question.
The final piece of advice is to always keep the old adage if it sounds too good to be true it usually is in mind. In the world of investments this is always true no matter who is trying to sell you something.

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Understand The Characteristics Of Short Term Investments

Remember that the government only represents about 30 and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In this article, we will discuss types of short term investment.
There are 3 types of short term investment and their characteristics are as follows:

1. Money market fund
Money market fund is a way of pooling contributions from many small investors and managing them by a professional fund manager working for mutual fund companies with very low fees.
a) Money market fund can be liquid anytime
b) It is one of many saving vehicles because the interest paid by this fund is low, it cannot increase your investment wealth.
c) Since the interest received is low, sometimes it may even fall below the inflation rate.
d) If the money market fund is only an investment plan that is used to accumulate wealth for your retirement, you will eventually go broke because of today's low interest rate environment and heavy taxation.
e) Money in the money market fund are pooled and moves from lenders to borrowers through money markets, financial institutions, corporations, governments, and central bank.
f) The lenders are usually corporations or institutions with spare cash that can be invested for a short period; the borrowers are those who temporarily need extra funds.
g) Commercial paper and Treasury Bills are 2 widely used instruments in the money market.

2. Government saving bonds
Government saving bonds are issued by the government and sells directly to the citizen via some financial institutions.
a) They cannot be traded (but only redeemed), their value does not fluctuate.
b) They are bought at the face value in the denominations of $100, $300, $500, $1000, $5000, and $10,000 from banks, trust companies, credit unions, and investment dealers.
c) Interest are taxed annually with no commission or fee.

3. Saving account
a) Putting your money into your savings account is considered as the easiest and simplest way to invest by lending your capital to financial institutions.
b) Daily savings account is the type of savings that interest is paid on the daily balance and is compounded monthly.
c) With regular savings accounts, interest is paid on the minimum monthly balance and is compounded every 6 months.

I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:

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Investment Options For A Personal Retirement Plan

As we mentioned in previous article, good financial management is
a) How to make the best use of your limited earned income, so that you can meet your current expenses.
b) How to implement strategies to achieve your short and long-term goals. Planing your longer term goal of building wealth for your retirement becomes more important than ever, because our government pension plan now nearly bankrupted. There are many doubts that our government can take care of all the baby boomers who will start to retire in 2010. With these uncertainty surrounding the government's pension plans, the savings and investments making up your own personal pension plan will be the key to financial well-being in your retirement years. In this article, we will discuss the investment option for personal retirement plan.

1. Registered investment
How to produce strategies that can minimize taxation's impact remain essential components of any financial plan. These strategies depend upon your understanding the different tax treatments of the three major categories of investment income such as interest, dividends, and capital gains. as well as reducing your taxable income, reducing your effective tax rate, and deferring taxable income to future years.
K401 or registered retirement saving plan shares the same characteristics below
a) The income earned inside a K401 in US or RRSP in Canada is tax-deferred until removed by way of a cash withdrawal or payment from registered retirement income fund (RRIF) or life income fund (LIF), or annuity.
b) Any contribution made to your K401 or RRSP (within annual limits) is tax-deductible.
c) K401 or RRSP not only provides for tax-sheltered compounding, but also generates additional capital through tax savings.
d) Company pension plan such as RRP, DPSP will reduce the members of an the K 401 or RRSP contribution limit to the actual amount contributed to those plans.
Therefore, in order to ensure there are enough wealth being build in personal retirement plan, it is wise to maximize your K401 or RRSP contribution every year, even you have to borrow to do so.

2. Non registered investments
Although registered retirement saving plan not only plays an important role for your retirement, it also represents an important component on the journey towards successful financial planning. There are limit on how much you can contribute to them, and you may reach these limits fast if you are covered by a company pension plan. Non-registered investments pay tax on investment income each year are more concerned with after-tax returns.

3. Home ownership as investments
Real estate always remains an investment option. With ownership of a home, you may gain extra equity through a home equity loan. This loan allows you to use equity of your home as collateral to borrow money to invest in the equity markets. Interest paid on such a loan is tax deductible and the interest rate is always lower than other loans.

I hope this information will help. If you need more information of insurance or series of articles of the above subject at my home page at:

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What Is A Mortgage Contract

As we mentioned in previous article, buying a home is one important decision that many people have to made sometime in their life. If you decide to buy a home now, there are many thing you have to known and many papers have to be signed before the home you brought can be registered to your home, house or real estate is used to secure a loan, the borrower signs a contract called a mortgage. It is a contract refers to the borrower as the mortgagor, and the lender is called the mortgagee. In this article, we will discuss the mortgage contract.

1. Equity of Redemption in mortgage contract
The right to redeem the property and to have the ownership transferred back when the mortgage is discharged.
a) In the mortgage contract, the mortgagor (the home buyer) agrees to transfer the ownership of the property to the mortgagee (usually is a financial institution or private lender) as security for the loan, until all amount of loan is repaid.
b) Both thee mortgagor and mortgagee sign the contract with or without third party mortgagor will receive a copy of the signed mortgage, and the mortgagee will retain the original.

2. The mortgage contract
There are 5 features of a mortgage contract
a) Detail of description of the property
b) identification of the mortgagor (the home buyer) and mortgagee (the person/bank lending the money to buy the house)
c) The amount of the mortgage with terms of repayment and amount of repayment as well as the interval of payment (usually weekly, biweekly, semi monthly or monthly)
d) Certain promises or covenants.
The contract stipulates that the mortgagor must
(i) make payments on time
(ii) pay the taxes
(iii) keep the property insured
(iv) keep the property in good condition
(v) not sell the property without the mortgagee's written approval.
f) An agreement that the mortgagor will give a charge on the property to the mortgagee, but will keep the right of possession and the right to redeem the property, when the mortgage is discharged.
If home buyer default on paying he or she monthly mortgage payments, he or she can lose your house (foreclosure).

Amortization Period
Repayment of a mortgage can take as long as 25-30 time period is called the amortization period.

I hope this information will help. If you need more information of insurance or series of articles of the above subject at my home page at:

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