Charting the Course

We all make decisions every day and we don’t have all day to make them. Sometimes people make decisions without taking time to consider all the information that’s available, relying on instincts and experience to make the right choices. 

In the high-stakes world of investing, information overload can be part of the landscape, especially for new investors in wide-open financial markets that are full of options and limited on time. They consider stocks, bonds, real estate and other opportunities, making decisions on stories that stand out with a sense of excitement, and they risk hundreds if not thousands of dollars on their potential.  

Bright, shiny objects with trendy names like cryptocurrencies, meme stocks, SPACs and NFTs can be eye catching, especially within the hyperbolic atmosphere of social media, news show banter and advertising.  

The phenomenon was in full display during the pandemic when millions of people with extra cash and time on their hands stepped into markets as though they were walking into shopping malls, investing in opportunities they thought would deliver big results in a hurry. And thanks to a sustained period of accommodative monetary policy from the Fed and market growth, many speculative assets succeeded. 

So for nearly two years, we watched advancing markets achieve all-time highs on a regular basis as new investors facing thousands of options grabbed hold of momentum plays touted by the media and discussed in nearly every watercooler conversation in America. 

Eventually the bull market that sprung to life amid the pandemic ended, leaving some to wonder what went wrong while more circumspect investors were glad they resisted the temptation to buy these riskier assets. 

And headwinds continue to develop. Our economy has weakened under the weight of high inflation, our supply chains continue to falter, the war continues in Europe and interest rates are rising. Times like these illustrate how a diversified and disciplined investment plan can keep us on course through the big gains and losses that are inherent in financial markets. 

Rest assured, there will be another mania down the road fueled by historic capital flows. Amid all the modern flurry of media hype and emotion, it’s hard to ignore the fear of missing out. But sticking to an investment strategy is important. And, for those who don’t have strategies, there are financial advisors who can help. 

In the uncertain world of financial markets, there is one thing we can count on – the dramatic ups and downs will continue. Investing with emotion will eventually carry us into rough waters but investing with a plan is much more likely to keep us on calmer seas.

Every now and then, we see media reports about celebrities who pass away, leaving vast holdings untethered by wills or estate plans. Family members, significant others, lawyers and advisers are left with months or years of work, untangling the financial mess.

Tech entrepreneur Tony Hsieh may be the most recent example of a high-flying fortune seemingly cast to the wind following an unexpected death. The founder of the online shoe and clothing retailer Zappos passed away in a house fire last November, leaving little word on how to manage an estimated $840 million in financial assets.

Reports show the only guidance family and friends could find were written on thousands of sticky notes stuck to walls throughout the house, noting financial commitments to employees, co-workers, friends and businesses. The 46-year-old left far-flung assets for his family to locate, and when all the dust settles, a vast majority of his wealth will likely be subject to the 40% estate tax rate.

Hsieh may be the most recent example, but there are plenty of other prominent people who have died, leaving close friends and family with little to no instruction on how to allocate their fortunes. The list includes Bob Marley, Prince, Aretha Franklin and Sonny Bono.

But estate planning is not just for the wealthy. Regardless of an estate’s size, an estate plan can be an invaluable tool that families can use to manage financial assets and other responsibilities after death.

Plans often contain a trust or will that address beneficiaries and how financial assets will be managed and distributed. Plans may also include a durable power of attorney, which designates a representative to make financial decisions, and an advance directive covering certain medical decisions.

If possible, it also is important to let beneficiaries know what lies ahead rather than waiting until you’re gone and letting them read about it in the plan. This approach can better prepare them for their financial futures, and it may also deepen personal relationships.

Estate planning is not always popular. Most people would rather not think about their mortality and name prospective guardians for their children. They must account for personal assets, and the process can take weeks. Attorney fees are not insignificant.

But the benefits outweigh the costs. Families experiencing a loss are already grieving, so why subject them to more work, uncertainty, and potential conflict with other family members? Without an estate plan, the public probate process can take months or even years to resolve.

Remember, plans are living legal documents and should be reviewed periodically to ensure they are current. Laws change and families evolve, so modifications may be necessary.

Estate plans can remain active long after you are gone, and it’s comforting to know assets will be managed and people will be cared for according to your wishes. No one wants to leave their family behind to decipher sticky notes hanging from a wall.

Depression-era criminal Willie Sutton might have put it best when someone asked why he robbed banks. The infamous thief was quoted as saying, “That’s where the money is.”

Well, banks still have money, but the fraudsters and scammers among us these days are going for easier pickings that are just waiting to be snatched from those struggling in the age of COVID-19.

While the rest of us are protecting our health and trying to feed our families, predators are at work, gaming the federal and state governments’ efforts to preserve the economy.

The federal Paycheck Protection Program, expanded unemployment benefits and economic stimulus checks are among the targets, and scammers are walking away with cash and the personal identities of thousands of unsuspecting victims.

Multiple coronavirus relief initiatives have been introduced this spring, sending trillions of dollars flowing into the hands of Americans, and scammers have hit their stride. Their schemes range from fraudulent PPP applications to bogus stimulus check websites. The first fraud charges were already announced a couple of weeks ago.

In this new world of COVID-19, there are many types of predators, and they’re out to harm more than our health. Vigilance is the key defense.

Businesses and self-employed individuals should use only banking institutions they know or are able to verify. Scammers are looking for opportunities presented by those desperate to get much needed relief. Play it safe and initiate contact yourself rather than answer an unfamiliar solicitation. With one report showing 645 domains related to the PPP registered between March 30 and April 20 alone, individuals should use websites that end in .gov for the most reliable information.

Thieves also are targeting the government’s enhanced unemployment program for jobless people affected by COVID-19. While these scams are costing taxpayers millions, they’re also harming businesses and individuals.

The Oklahoma Employment Security Commission has seen thousands of people file bogus layoff claims against unsuspecting businesses. In fact, my wife recently received notice of two fraudulent applications in connection with her LLC in consecutive days.

Even though the government is sending the funds, employers and employees stand to lose. Employers could pay higher unemployment taxes, and employees with stolen identities could face a host of financial consequences.

Businesses and individuals can fight back by contacting the OESC if they receive filing notifications that they are not familiar with, and vigilance pays off. So far, they have discovered nearly 4,000 fraudulent claims.

There are even scams designed to dupe individuals still waiting for their stimulus payment into giving up personally identifiable information to speed up access to the funds.

Scammers are contacting victims through email, calls and texts, offering to help obtain funds faster or for a fee. Just click the link, they say, and fill out the form with your name, Social Security number and/or bank account number. These thieves are feeding on the desperation of others, using stolen identities to try and obtain credit cards and loans before fading into the woodwork.

Disasters can bring out the best and the worst in people, and the coronavirus is no different. People can protect themselves by investigating suspicious offers that show up in inboxes or mailboxes, and they should never hesitate to consult with trusted friends, financial advisors or attorneys.

As we all work to keep ourselves, our families and our neighbors safe from the virus, it’s important to watch out for the predators who don’t show up under a microscope. Sometimes, they can be just as destructive.

Max Rhodes is the chief compliance officer at Full Sail Capital.

They’re not particular. Generational lines don’t really matter to them. Baby boomers, Gen Xers, millennials. A target is a target. Just give them a name, a number and an address and they’ll go to work.

These are the criminals who can rob you with a smile, a handshake and a pat on the back as they’re walking out the door.

Con artists, scammers and fraudsters are out there in rising numbers, using more sophisticated means than ever, and they’re not going away. Many victims find the most lethal culprits are people they know, family members, friends or caregivers.

Locked doors, alarm systems and bank vaults can’t protect against this type of thief. Awareness, caution and education are the best protections.

Today’s society is pulsing with technology and information overload, making it almost impossible to keep up with changes as we go about our daily lives, so it’s easy to be ambushed with a pitch, a story or an opportunity that sounds plausible. Some scammers will go to great lengths to boost their credibility, creating websites and slick promotional materials.

The scams are countless, and many are age-old. It might be some type of investment that requires you to lock up your money, cutting your access to it, or maybe it’s not an investment at all. Perhaps it’s a vacation, a new product or a claim that you’ve won something. Beware of callers who say they’re with the IRS, strangers asking for your address or people who want your Social Security number.

Pay attention to checking accounts, savings accounts and credit card accounts. Keep up with where money goes. When scammers obtain access, they typically take small amounts of money at a time to help evade detection.

While vigilance is a good first line of defense, it may be helpful for some to have a trusted friend or a family member as a backup. And now, through the Senior Safe Act of 2018, financial advisers can help.

Under the law, financial advisers and employees with financial institutions can be trained on how to identify exploitative activity against seniors, and the law opens avenues for reporting without the risk of liability.

This important development in the fight against fraud allows financial advisers to serve as objective third parties that are in a unique position to see red flags.

For example, there may be red flags when a widow starts bringing someone new to meetings with her banker or financial adviser and giving access to her financial accounts. Or, there may be sudden changes to beneficiaries. Financial advisers can also monitor transactions and spot requests to send money to third parties, or they can watch for unusual withdrawals.

Unusual activity does not always mean exploitation, however. That’s why financial advisers might encourage clients to identify a trusted friend or other contact. Communication is a key to identifying fraud.

These days, baby boomers are among the most vulnerable, and, with more money than any other generation in history, they are a lucrative target.

So, there can be a lot at stake, making it more important than ever to take measures that protect wealth from dangerous exploitation, and it’s good to have people who can help.

And, always remember, if it’s too good to be true, it probably isn’t.

Max Rhodes is an attorney and the chief compliance officer at Full Sail Capital.