Bad advice and fraud can be avoided when looking for financial advice

Tom Temin Undoubtedly, there is a lot of terrible advice given these days.

Thiago Glieger: Indeed, there are a lot of dishonest people out there who are bent on taking advantage of others in order to enrich themselves. which is a truly regrettable aspect of the sector. And because finance is such a complex industry, it is evident in many other industries as well. And quite frequently, consumers are unsure of exactly what is going on with their accounts. This was the situation in this instance, where customers were unsure of what was going on, what was happening, and what kind of fees were being charged on the account. They ultimately had to pay the price.

Tom Temin Indeed. As opposed to merely paying fees for poor advice, in that instance, they were truly conned out of a portion of their principal. You may eventually receive that advice, but it’s not always theft or criminal activity. Fraud took over in this instance. Exist any warning indicators that the public should be aware of for potential fraud?

Thiago Glieger: Adhering to account statements is, in my opinion, the most important thing you should stay vigilant about. I’m a big believer in not following every day because keeping an eye on the markets can cause anxiety, but you also shouldn’t ignore what’s going on in the account. There ought to be a location where the custodian of the funds is going to report the amount of money coming in and going out. I acknowledge that there were forged signatures involved in this instance as well. And so the account was losing money. You’ll also be able to see, “Hey, wait a minute, where is this distribution going? Did I authorize this? Does it look right to me?” if you’re keeping an eye on those account statements.

Tom Temin TSP accounts, or their equivalent, IRA accounts, are of particular interest. There would then typically be no payouts whatsoever until you retire.

Indeed, Thiago Glieger. Distributions shouldn’t be coming out of there unless you’re the one starting one with the TSP directly. As such, you should be fully aware of all that is going on in the TSP if you are working with a financial planner, advisor, or someone who is representing themselves as a financial counselor and they are giving you forms or explaining how to make a distribution or move money out of the plan. Questions such as “Where is it going? Why is it being done? How is that going to help you in the long run?” should be asked.

Tom Temin And then, of course, this individual, whose name I don’t know, was a prick in comparison to the greatest Ponzi scammer of all time, Bernard Madoff. Furthermore, he was hiding in plain sight because the returns were so strong and reliable. Therefore, I suppose that in these modern times, following Madoff, if you see the market fluctuating and you keep rising, that in and of itself is a sign.

That’s correct, Thiago Glieger.

Tom Temin: Unbelievably good.

Thiago Glieger You’re absolutely right. Advisors don’t work like magic. We engage in the markets on their behalf when we build portfolios for clients. Thus, if the markets are rising, then so should the clientele. You ought to fall along with the markets if they are declining. Numerous products on the market make bold claims. Many federal workers frequently receive pitches for these kinds of products that promise never-ending profits as long as they safeguard their principal. And those are typically constructed around contracts for insurance. That’s how some protection exists there. Remind yourself, though, that something seems too good to be true. I always like to start asking more questions and make sure clients understand, especially if something seems like it will protect them. How does this work? Are you comfortable with the investment product? Can you explain how it works?

Tom Temin And even though it’s a sound investment, there are instances in which the presumptions may be overly optimistic. I think I was on a mailing list for oil well operators about a year ago. After doing some research, they appeared to be a reputable business. Not just their website was examined; I also looked at other sources. I also took a look at the map that indicated the locations of these sites. Although there is drilling going on in a sizable portion of the nation, their estimates for crude oil prices appear to be reasonable. Furthermore, they requested a sizable investment in a portion of this and other things. And instead of trying to be a good person, our advisor advised us to just buy some oil stocks if that’s what we wanted to do. Thus, it might be worthwhile to give that somewhat unusual item another look.

Actually, Thiago Glieger. The TV commercials and similar content that you may have seen promote investments in Belize. These programs, which you enter essentially as a limited partner, are known as direct participation programs. You sign an agreement committing to a certain amount of money, and there may be interesting tax advantages—such as write-offs and the like—from that type of arrangement. However, because of how highly specialized it is, I would even venture to say that it’s not the most advantageous thing for the majority of federal employees I have seen. Additionally, if you were to invest in a tool, you might go to Home Depot or Lowe’s and pick up a tool for a project. Investments are interchangeable. Whatever your goals are, be they financial aid for college, retirement, home ownership, or something else entirely, what kind of tool will be most helpful to you in achieving them?

Tom Temin: Thiago Glieger is a private wealth advisor at RMG Advisors in Rockville, Maryland. Additionally, TV commercials for fiduciary firms are shown. That person, who isn’t affiliated with any specific fund or investment portfolio, is regarded as the gold standard, I suppose. In our opinion, our fiduciary is truly the gold standard, but is that always the best option? Could you also succeed if you have a connection to a business that profits from investments?

Thiago Glieger: In my opinion, you should be able to distinguish between people who are trying to sell you a certain product and those who are offering you advice regarding your own financial future. Therefore, it can be completely acceptable to go through transactional business processes when you buy a car, life insurance, or a house. You are being sold an insurance policy. It’s acceptable that they aren’t always acting in a fiduciary manner. However, I believe that someone should be a fiduciary if they are advising you on your financial future and these huge transactions that are taking place. This is because, according to the law, a fiduciary is someone who must act on behalf of another party and is obligated to act in that party’s best interest. Therefore, I believe there is an ethical obligation in addition to the legal one. The counselor in question committed a grave ethical violation in this instance by advising clients to take actions in their accounts that would benefit him more in the long run—in terms of commission and other benefits—than those that would benefit the family.

Tom Temin: So, when someone tries to sell you something, whether it be fiduciary or not, what are some of the questions you should ask them?

Thiago Glieger: If they are acting in a fiduciary capacity toward you, there should be a written, signed statement stating so. I believe the first question to ask them is always, “Are you operating under a fiduciary duty? Is that in an agreement somewhere?”. Beyond just the investments, I believe there are additional concerns about their potential to assist you. I believe that the person speaking with you about matters that are important to you, such as your family, is acting in a fiduciary capacity. Topics such as taxes and health care. Those are indicators that someone cares about you and your well-being, not just about getting you the greatest or newest investment. And how do you want to spend your time?

Tom Temin One of those areas is that there are a lot of intricate decisions that come with deadlines as retirement draws near, particularly if you plan to be near Medicare, which is a complex system. When you have questions like that, for instance, someone ought to be able to assist you.

Thiago Glieger: Indeed, as well as Social Security and Medicare planning. The Social Security application process has over 500 variations, and occasionally even the online information can be extremely confusing. Preparing, examining alternatives, determining if filing under one spouse’s name first and then the other, or waiting until you are 70 years old, was the next step. Anything and everything beyond what you have invested in? Should you both wait until you are 70?

Tom Temin Moreover, tax policy—or how you respond to it—is the other concern. Is a fiduciary required to be an expert in taxes, or do they possess sufficient knowledge to ensure that you avoid making mistakes and paying unnecessary taxes?

Yes, Thiago Glieger. Tax planning and tax advice are two very different things. The IRS seeks to ensure that tax advice is not being given by someone who is not registered as an accountant. To be precise, though, tax planning constitutes a significant portion of the financial planning process. It’s the first time you are in charge of earning your income, especially when you are retired. It goes without saying that you pay taxes if you have a first pension, as do federal employees. It is something over which you have little control. There is also significant taxation on Social Security. All of your savings, your withdrawal policy, your investments, and the activities you engage in with your assets throughout the year are all considered factors. These all have an impact on your taxes and ensure that you are utilizing your Roth. I am aware that we have previously discussed preventing large RMDs in the future. All of those are crucial planning considerations that can benefit even those who aren’t willing to pay an advisory commission greatly. I don’t want to generalize, but if they’re interested in those talks with you, it’s likely that they care about your wellbeing rather than merely trying to take advantage of you.

Tom Temin Your TSP account is similar to artificial intelligence in certain aspects. The data you enter into it is a contributing factor, according to the experts. However, what you ask of it is a crucial factor in achieving successful outcomes. The incorrect question will yield absurd answers. In the same way that you should carefully consider your input strategy, you should also carefully consider your withdrawal strategy.

Indeed, Thiago Glieger. I recently spoke with a family who believed that distributing money from their TSP would be the best course of action given the sizeable tax bill they would soon have to pay. They also had a few fewer options available to them at the moment. Consequently, however, a sizable TSP distribution also brought with it a new tax issue for the subsequent year. Developing strategies involves considering more than just how to pay the tax bill; rather, it involves considering other factors that are interconnected.

Tom Temin And speaking of which, what about those tax assistance companies that you frequently hear on the radio? You know, the ones with the actors that say things like, “I didn’t pay my taxes for 11 years.”. It was getting to me. To which I say, “Well, you should go to jail.”. For the previous 11 years, the rest of us paid. These companies usually have something worthwhile to offer you.

Thiago Glieger: It seems to me that the majority of the clients of those firms are those who are having tax issues. There may be individuals who neglected to file their tax returns. Whatever the reason, they didn’t want to perform it. It’s a crime now, so they’re more interested in working with the IRS and keeping you out of jail. Therefore, they aren’t really trying to lower your tax liability on a regular basis through tax planning. To make sure you don’t spend a significant amount of time in prison for unpaid back taxes, they are working backwards.

Tom Temin because they give the impression that they can eliminate the tax burden. However, I don’t believe too many people are capable of it.

Thiago Glieger: They can engage in some negotiation, assist you in communicating with the IRS, write letters to them, and perform other tasks that an accountant would also be able to perform on your behalf. Your tax obligation, however, cannot simply be eliminated. That will continue to exist.

Tom Temin You’ll be vaporized by them. I suppose the last query is, how many calls or meetings can you reasonably expect from a fiduciary? You don’t want to ring them every day, but you also don’t want to wait until the end of the year to see how things are going.

Yes, Thiago Glieger. Alongside our customers. I prefer to see clients anywhere from six to ten times during the first year of working with them. Particularly in the early stages of retirement, there is simply too much. There’s plenty to gaze upon. Other than that, I strongly advise people to follow up with their advisors a few times annually. That seems like a pretty reasonable amount to exchange every six months or so, just to make sure everyone is on the same calendar. You should also be able to communicate via email and ask each other any quick questions that may come up. Someone who is looking out for your best interests should be open to anything that has a dollar sign attached to it. Will you be making an insurance claim because your roof has a hole in it? Will you have an issue with that later on, as you might not be eligible for insurance due to XYZ? Thus, I believe it’s crucial to have those discussions. Furthermore, you shouldn’t be embarrassed or ashamed to ask your advisor a question. They’ll let you know if it’s inappropriate or something they feel uncomfortable answering, but at least they’ll pose the question. Your advisors are there for exactly that purpose.

Tom Temin Probably helpful to keep in mind, too, is that while most things in life do have a dollar sign associated with them, they are not psychiatrists.