{"id":6467,"date":"2013-06-07T12:01:33","date_gmt":"2013-06-07T19:01:33","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=6467"},"modified":"2016-12-21T07:30:36","modified_gmt":"2016-12-21T15:30:36","slug":"the-problem-isnt-madoff-its-you","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/the-problem-isnt-madoff-its-you\/","title":{"rendered":"The Problem Isn’t Madoff, It’s You"},"content":{"rendered":"

Bernard Madoff lulled thousands of investors into complacency while he ran a massive Ponzi scheme with their money. Now he’s in jail. Recently, he spoke on why and how people get scammed by\u00a0Wall Street.<\/p>\n

Talking to Madoff now is a bit like hiring a former computer hacker as a security consultant. You think you’re going to learn something technical, some insider’s trick.<\/p>\n

Of course, any hacker will tell you that the weakness is not your firewall or your servers but your employees. It’s far easier to influence a person than to break a decent security system. They call it “social engineering” these days, but it’s just a con.<\/p>\n

\"madoff\"<\/a><\/p>\n

In a con, the most important piece of the puzzle is you, the “mark.” You almost have to want to be scammed, and that’s the really useful part of what Madoff has to say in his\u00a0recent jailhouse interview with MarketWatch<\/a>.<\/p>\n

Here are some selected quotes that show how human nature is the tool at work, not financial chicanery:<\/p>\n

1. “If you don\u2019t understand something, then don\u2019t invest in it. People asked me all the time how did I do it, and I refused to tell them, and they still invested with me.”<\/strong><\/p>\n

Ah, greed. It’s often forgiven as a necessity in investing. Nevertheless, greed is what causes us to put on our blinders and throw our money in without a second thought. We really don’t want to know how it’s done, as long as it\u00a0gets done and we get out in time<\/a>.<\/p>\n

And that’s the tricky part. Some of Madoff’s investors were made whole by chance, having departed early. Others clearly weren’t. Both groups had on blinders the whole time.<\/p>\n

2. “Use a qualified adviser. There used to be registered advisers that were educated and qualified on different financial investments. We don\u2019t have that anymore.”<\/strong><\/p>\n

Earlier in the article, Madoff recommends index funds. That’s good advice on several levels, but the fundamental point he is making is that it’s very hard to get steered wrong when no one is steering at all.<\/p>\n

But he’s wrong on another: There are registered investment advisers out there, and they have a simple, SEC-regulated mission to\u00a0act in the best interest of their client<\/a>.<\/p>\n

If you feel you need guidance, just ask the financial advisers seeking your business, “Are you an RIA (registered investment adviser)?” Also ask for their\u00a0SEC Form ADV<\/a>. It should spell out in plain English who they work for and how they get paid, exactly.<\/p>\n

3.\u00a0\u00a0“If it sounds too good to be true, it is.”<\/strong><\/p>\n

Madoff makes an interesting point here. He didn’t get caught in part because his returns were not out of line with expectations. So it’s possible to be scammed by an adviser bringing you even average returns.<\/p>\n

But his larger point is well-taken. Every adviser out there is selling his or her expertise. That often takes the form of an\u00a0implied promise to bring you a return that beats the market<\/a>, time and time again.\u00a0Caveat emptor.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Bernard Madoff lulled thousands of investors into complacency while he ran a massive Ponzi scheme with their money. Now he’s in jail. Recently, he spoke on why and how people … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":6468,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[47,1],"tags":[],"yoast_head":"\nThe Problem Isn't Madoff, It's You | MarketRiders.com<\/title>\n<meta name=\"description\" content=\"Bernard Madoff lulled investors into complacency while he ran a massive Ponzi scheme. Now he's in jail. 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