Saturday, January 28, 2023

Having lived through the crash of 1987, the dotcom bubble of 2000 and recession in 2008, I’ve seen my share of market disruption and how it impacts peoples’ lives. A year ago, I highlighted the Yosef story focusing on the idea of saving during the good times in preparation for the seven bad years. Yosef taught us that good times can’t last forever.

Without predicting how long or deep this disruption will last, I would like to highlight one concern that often follows a drop in the market. Unfortunately, there have been fraudsters dating back to, well, Ponzi and before. There will always be people searching for ways to steal from others. It’s easier to do so during good times because the frauds are harder to detect. Investors tend to leave their investments in place and if the fraudster needs money to replenish those removing their assets, there are often new investors to satisfy the need.

However, it’s when the market drops that these fraudsters tend to be exposed. As they are inundated with redemption requests and an inability to raise funds from new investors, the fraudster’s scheme unravels eventually.

National Realty Investment Advisors, a real estate company you have likely heard advertised on the radio in the last few years, claimed safe consistent returns from its high-quality real estate investments. It’s recently been announced that the NJ Bureau of Securities has issued a cease and desist order to the company, which is accused of defrauding investors. The company has filed for Chapter 11 Bankruptcy.

As I’m writing this article, the news of FTX—the crypto catastrophe that is just now becoming known—will impact many small investors who saw this as an opportunity to participate in a different investment vehicle.

I expect there will be more announcements like this. The best you can do is to look at your investments and search for red flags. As the Acting NJ Attorney General Matthew Platkin stated, “If an investment opportunity promising high guaranteed returns sounds too good to be true, it usually is.” If your investment is showing consistent positive returns, even in this weak market, you should investigate further. Speak with a trusted financial advisor or attorney to address your concerns. Does something seem off in the statements you are receiving? If you request a small redemption, is there a delay and a questionable explanation for why your request can’t be accommodated?

Most advisors are honest and are likely experiencing challenging times as a result of the current market. Don’t be afraid to have a difficult discussion with them. This gives them an opportunity to discuss strategy with you and can help allay any fears and concerns you may have.

Experiencing a drop in your portfolio is a part of investing. Having your funds stolen shouldn’t be. Diligence on your part is the best tool to avoid leaving a Ponzi scheme with the mad rush heading for the door because by then it may be too late.

David Siegel is a Vice President of Mortgage Lending with Guaranteed Rate Affinity (GRA), a leading national retail mortgage lender. David has over 15 years of experience at major banks and with mortgage bankers, and understands the guidelines of different lenders to help direct his customers to the best loan type for their needs. David will help you find the right choice for you. He is located at 16 Arcadian Avenue 3rd Floor, Unit C-6, Paramus, NJ, 07652. Contact him via email [email protected] phone 201-725-9527.NMLS 277243 Guaranteed Rate Affinity NMLS 1598647 Equal Housing Lender.

For licensing, go to nmlsconsumeraccess.org, 16 Arcadian Avenue 3rd Floor, UnitC-6, Paramus, NJ, 07652. Licensed by the NJ Dept. of Banking and Insurance. Licensed Mortgage Banker- N.Y.S. Banking Department

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