With William Francavilla, Certified Financial Planner, and author of The Madoffs Among Us: Combat the Scammers, Con Artists, and Thieves Who are Plotting to Steal Your Money
Scam artists and thieves steal over $100 billion from Americans each year. In 2016, in the financial services industry alone, 52,000 advisors were disciplined for misconduct, that’s 7% of the workforce. And, after being terminated, 44% of them were back working at another financial firm within a year. Steve’s guest, Bill Francavilla is a Certified Financial Planner with over 30 years of experience who helps consumers protect themselves against fraud through his new book, The Madoffs Among Us: Combat the Scammers, Con Artists, and Thieves Who are Plotting to Steal Your Money.
A Few Bad Apples
After over 30 years in the financial services business, Bill believes the overwhelming majority of financial advisors have their clients’ interests at heart—it’s the bad apples that spoil it for everyone else. His book aims to warn Americans of the scams out there and teach them the basics of financial planning.
Financial Exploitation Statistics
According to a Certified Financial Planner Board of Standards study on the financial exploitation of seniors, 74% have purchased unsuitable products, 58% of advisors omitted important facts, 48% may have misrepresented investments, 46% of advisors are guilty of negligence or lack of follow-up, and… 19% committed fraud with intent.
You Too Can Be Conned
Bill takes his cue from Simon Lovell, the ultimate con man of the 20th century, who said, “I love it when people tell me they can’t be conned.” His first piece of advice is that even the most intelligent investors should know that they can be conned. For instance, one of Steve’s past guests was an expert on financial scams but still ended up getting conned by Bernie Madoff.
Keep Emotions Out Of Financial Decisions
Bill Francavilla’s second piece of advice in The Madoffs Among Us is to make objective decisions without emotion. For instance, greed motivates us to buy lottery tickets as the prize money goes up even though we know our probability of winning keeps going down with every additional ticket bought. Most of our financial decisions are governed by greed and fear. To break that dependence, don’t rush into decisions, instead take a timeout for 24 to 48 hours to let it sink in.
Knowledge: Your Best Defense
His third recommendation for not being conned is having knowledge and information. Bill recommends using the Internet to do your research on all investments, especially those that sound too good to be true.
Other Scams To Be Aware Of
During his research for The Madoffs Among Us, Bill Francavilla uncovered a number of other common scams, such as the IRS scam where people are told that they’re seriously delinquent on their taxes and could get arrested if they did not pay up immediately. The caller then asks for your credit card details. The IRS does not work that way. They don’t call, and they certainly don’t ask you to pay over the phone!
While all this sounds funny, people fall for it all the time. For instance, a man from India used the IRS scam to make $300 million in a few months before he got caught, which means many Americans lost their hard earned money to him.
Steve adds that the financial services industry contains a fair amount of complicated products and intangible concepts. These, along with other financial scams and how to stay protected, are explored in his next segment with Bill Francavilla.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: Scam artists and frauds steal over $100 billion from Americans each year. And in the financial services industry alone, 52,000 advisors were disciplined for misconduct in 2016—that’s 7% of the workforce. And once they’re terminated, if terminated, 44% of them are back working at another financial firm within a year.
So, what’s going on here, and what can the investor in need of a good advisor do to protect themselves? Well, Bill Francavilla joins me to answer this and other questions. From his new book, The Madoffs Among Us: Combat the Scammers, Con Artists, and Thieves Who are Plotting to Steal Your Money.
Bill is a certified financial planner with more than 30 years in the financial services industry. Hey, Bill, welcome to the show.
William Francavilla: Well, thank you for the invitation, Steve. I’m pleased to be with you.
Steve Pomeranz: Yeah, the title of your book really kind of speaks for itself, The Madoffs Among Us.
We know all about Bernie Madoff and the scams that he pulled. But why in particular did you write this book?
William Francavilla: Steve, I spent over 30 years in the financial services business. And I will attest to the fact that the overall majority, the overwhelming majority, of financial advisors are really doing a great job.
They have their clients’ interests at heart and are taking care of their needs. But it’s always those several people, those few people on the periphery, that are concerning. And they do constitute a pretty strong percentage, as I indicated, 7%.
Steve Pomeranz: Yeah.
William Francavilla: In all probability, have been up to some nasty stuff.
And this book was written in an attempt to not only warn Americans that they’d better be careful. But also to inform them of some of the basic elements of financial planning whereby they might even be able to go it themselves.
Steve Pomeranz: Yeah, so let’s get to that point, but first, you quoted a study from 2012.
Certified Financial Planners’ Board of Standards studied senior financial exploitation. And it said 74% of investors have purchased unsuitable products, 58% of advisors omitted important facts, 48% may have misrepresented an investment, 46% are guilty of negligence or lack of follow-up. Which are sins, some of them, they’re kind of sins of omission.
Maybe sins of lack of knowledge and things like that. But the last one is the one that bothers you and me the most, 19% committed fraud with intent or lying. So how does one spot a fraud?
William Francavilla: Those are alarming statistics. And when I first read them, I said, my goodness, can this be true?
But as a result of that very comprehensive study, as you indicated. There are three items that I’d like to point to. That I think are most helpful for investors and clients. And I cue from a gentleman named Simon Lovell, he was the ultimate con man of the 20th century.
He conned everybody, he’d go into a bar and do card tricks just to catch here a little extra cash. He went to jail, he came out. And he made a very interesting statement, Steve. He said, “I love it when people tell me they can’t be conned because in my mind they’re halfway to being conned.” So the first element of advice that I present to anyone who’s willing to listen is look yourself in the mirror and admit that you can be conned. We all think we are pretty smart, I think I’m a pretty smart guy.
I know you’re a pretty smart guy, but guess what? We can be conned and maybe even, like me, Steve you have been conned, I’ve been conned. [CROSSTALK]
Steve Pomeranz: Let me interrupt you one second because it’s fascinating, I once interviewed a professor who was an expert in Ponzi schemes. He could smell them a mile away. And yet he got caught up in Madoff.
William Francavilla: My goodness.
Steve Pomeranz: So even an expert [CROSSTALK] [LAUGH]
William Francavilla: Yeah, not surprising.
Steve Pomeranz: We had a good interview, I could tell you on air. It was like what, you did what, what happened to you?
[LAUGH] Are you sure?
William Francavilla: [LAUGH] But I wrote a book on scams and I’ve been scammed. Funny, it’s not funny, it’s sad.
Steve Pomeranz: Yeah well, It happens to all of us. So number one, be humble, stay humble, and admit that you are susceptible to getting scammed, what else?
William Francavilla: Number two, avoid making any decisions with emotion. If it sounds too good to be true, guess what? It probably is. Every several months when the Powerball lotto gets up to $500 million. What happens?
Steve Pomeranz: Yeah.
William Francavilla: Everybody starts buying in and it, they exploit the whole situation and it swells even further than that $500 million.
We typically are governed by greed and fear. And if something sounds too good to be true, guess what? Why don’t you take a break, step back. Maybe let it resonate for 24 or 48 hours. Number three, the key variable, the key ingredient to making certain that we are not being conned is knowledge, it’s information.
You can easily go do a Google search on something that sounds too good to be true. And it is going to uncover a plethora of information and experiences from other people who will tell you, stay away, this is not good. For instance, the IRS, this is a current very, very popular scam.
Incidentally, Steve, in my book, I talk about financial services because that’s been my background. But during my research, I uncovered a number of other scams that are prevalent in American society today. So I mention those to make sure that people are aware of it.
The IRS scam is very simple, you get a robocall. It’s “this is Agent Bill Smith and I’m calling to tell you that your taxes are very seriously delinquent. And unless you call this number back, we’re gonna dispatch the sheriff’s department to arrest you.” Well, I got one of those calls and I knew it was a scam. I called, I said, “hey, tell me what’s going on. What’s going on?” And they said, “Well, you owe us (I think it was $1,600) and unless you pay it.” I said, “how do I pay?” He says, “well, give us your credit card number and we will make this go away.” [LAUGH] Guess what? The IRS doesn’t operate that way, I’ve got my opinions. But they don’t operate that way.
Steve Pomeranz: No, well, first of all the IRS is not going to call you, the IRS does not call you.
William Francavilla: No.
Steve Pomeranz: We just were subject to something like that because we have a Facebook page for the show and we got blocked somehow.
And we’ve been trying to get in touch with Facebook and there was a number to call. And, basically, they said, “yeah, well, what you need to do is you need to go to Walgreen’s and get a gift card.” I mean it was more detailed than that but that was the bottom line.
William Francavilla: But here’s the sad part about it, Steve. I mean you and I are chuckling over this but it works. [CROSSTALK] People think, that’s all I have to do I’m gonna do it. I’m gonna do it. This the IRS scam. There was a guy from India who had a factory full of people making outgoing calls, scamming Americans on this IRS scam. $300 million they were able to capture in just a handful of months before he was arrested.
Steve Pomeranz: My God.
William Francavilla: So as silly as it sounds, it’s effective for these thieves.
Steve Pomeranz: Yeah, well, you talk about smart people or whatever, but it seems to me that all of us are busy doing other things. We really can’t be expected to be experts in everything. And you know the financial services industry and investing contains a fair amount of complicated kinds of products and concepts. Concepts that are intangible concepts, they’re concepts of the mind.
They’re not physical concepts like going to buy a car and the like. And I want to get into that in a minute but we’re going to stop right now. We’re going to be back with Bill Francavilla. The book is Madoffs Among Us: Combat the Scammers, Con Artists, and Thieves Who Are Plotting to Steal Your Money.
We’ll be right back.