How to Spot a Financial Scam

Show Trancript

Jimmy Turner, MD:

Justin, the impetus for the show, listener reaching out and emailing us about financial fraud. And I’m going to read this because I think it’s, I think it’s important to [00:03:00] just kind of provide some context here. So it says, I’m a physician, and I learned how to save money and be financially savvy from my parents.

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They were always really good at saving money and spending very little. They managed all of their investments themselves. On teacher salaries, they were able to amass about three million dollars in retirement savings, which is incredible, by the way. Sadly, about a year ago, they were involved in a scam, where they thought they needed to transfer their retirement accounts into what they thought was a secure account set up by the FBI.

Of course, it turned out to be a scam. Part of that scam was that they told my parents not to talk to anybody about this, so I didn’t know about it until it was too late. In the long run, my parents completely lost 2. 4 million dollars, or about 80 percent of their net worth. About 2 million dollars of that was actually Roth IRA money.

They go on to say a few other things about it, but Justin, they reached out and said, Hey, this is my situation, and then they ended the email basically saying, Hey, if a financial advisor had been involved, Would this have saved things? is there a layer of protection that’s provided by a financial advisor that they wouldn’t have otherwise had?

And actually I punted that email to you and then [00:04:00] you responded and just lit up my world with other examples of this stuff happening. So I’m going to toss it to you and just see what your take was.

Justin Harvey, CFP: This one is sobering. Jimmy and I have, I can, as I think back on my Career as a financial advisor. I can distinctly remember a handful of moments where you get that punch in the gut feeling. And you probably in medicine, I’m sure you have these cases where, you know, it was crazy and things went sideways and bad and they stick with you and they forever change how you practice as a doctor.

And I have those experiences As a financial advisor, and I got to be honest, like reading this email was another one of those that goes into the top handful of hearing about two school teachers that saved their whole lives to have Roth balances of 2 million that was taken by scammers. And in terms of like generational input, not only is it like it’s, it’s an egregious thing to have your life’s savings.

Stolen, but there’s intergenerational impact even. And [00:05:00] the, you know, the way that a family wanted to share wealth that they have built for their children, that’s now not going to happen to their grandchildren is, it’s a very like sad. It’s really sad and just gut wrenching.

Jimmy Turner, MD: Yeah, no, it really is. And I’m trying to remember, there was a movie I watched, I’m not going to come up with the name of it right now, where it was about this exact thing and I really want to remember the name of this, but basically this guy lived in like a farmhouse and ended up, being apparently like this lethal,guy with like some secret service background and do you know the show and ends up finding out a scammer.

So anyway, he walks into this room because this woman got scammed for her money and then she commits suicide. And this is the woman that’s let him live on his land out in the middle of nowhere so no one would find him. And he was retiring, basically getting off the radar. And And and so he goes and finds the scammers because he cared about this woman, and he walks into this room, and it’s just a bunch of people that are like on the phone, like dialing people up and like doing exactly what this is talking about, and of course he lights the place on fire, which was, [00:06:00] after reading this, I actually think it’s really great.

and but yeah, it was, it’s crazy that this even exists, this happens, and we all, Get the messages. Hey, you know this you’ve got the Saudi Arabian trust that has been left in your name please provide your social security number like there are certain times. We’re like this is really obviously a scam But then there are some that are elaborate enough that it’s believable.

In fact, I found one article from a New York Times That it’s a financial columnist who ended up having one of their firms Was scammed and they had no idea they write a financial column for a living It was so elaborate that their own firm didn’t catch it and ended up giving millions of dollars away from client portfolios.

and so, yeah, it’s bad news.

Justin Harvey, CFP: Yikes. Yeah. And while, since we’re addressing a physician audience, I will say there’s There’s one in the last couple of years where there is a lot of publicly available information. If you’re a doctor, your NPI is Googleable, your [00:07:00] CV, and a lot of that will be leveraged and has been leveraged by scammers to usually it’s what I have heard.

Is that it’s in the context of like, Oh, you missed the deposition, you missed the court date, you’re being held in contempt of court, and then it immediately puts the listener, the person receiving the phone call on the defensive is like, Oh, we’re, let’s verify your NPI number. And were you the one who did residency here, fellowship here, yada, yada.

And it’s this very convincing sort of. Line of questioning that then concludes with you need to pay us 5, 000 in gift cards from CVS or something similar. And I personally know people that have been impacted by this to the meaningful financial detriment, you know, of their circumstances. So doctors are particularly vulnerable just because of how much is out there about you and, something to be aware of people saying they’re from the police department, even if it like shows up on your phone as the police department, it’s crazy how Detailed these scams can be it takes a lot of due diligence to Be able to [00:08:00] uncover them

Jimmy Turner, MD: Yeah. I mean, it’s like when people show up at your door. I’ve seen a video of, of these two guys showing up at a door and, and the person basically being like, hey, who are you like? Oh, we’re federal agents. He’s like, okay, show me your badge. what’s your number? What’s your name?

Tell me your full name and he’s got the entire thing on video and like they won’t say their name They won’t say their badge number and it’s like if someone shows up from the fbi and identifies themselves They will 100 provide their name and their badge number and a number to call To confirm their identity and they’ll wait they’ll sit there and wait for you to do it And so it’s like but somebody walks up with a badge and says it from the fbi are you really going to press them because in that situation you’re like, oh my god, i’m talking to the fbi You And what am I going to do?

And so these are high pressure situations. Another one that you sent me, Justin, was this article about this guy that thought he was, dealing with a crime ring. And he was helping to solve that problem and that they were going to need him to shift money in order to be a part of solving this thing.

And he felt like he was doing something really helpful. It turns out they were just taking his money. And so it’s, and these things can become so elaborate [00:09:00] where they’re like, you know, we’re going to actually pass you off to somebody else to make sure that, we’re doing this securely for you.

So hold on. We’re going to make sure that you can verify this. this isn’t a scam. Like they even bring up that it’s a scam to make it more likely to be like, Oh, well, they wouldn’t, they wouldn’t say the word scam on this phone call if it was actually a fraud, right? this was a, a scandalous event.

and so it’s pretty elaborate that the way these things can go. Yeah. Yeah,

Justin Harvey, CFP: and one of the things you brought up and I I have reflected on since is is Working with an advisor a layer of protection like hopefully if you’re working with me It is because I have a natural skeptic cynic, you know now even Jimmy since we’ve had these conversations I’m like I feel like any money transfer, first of all, as an, just a little bit of background for listeners, there’s different types of transfers and different levels of risk in terms of transactions.

And there are a number of ways where an advisor can make a big, expensive mistake where they’re going to have a big problem. And then there’s an, a category of transactions, transfers, things where it’s a, [00:10:00] there’s really no danger. Most of what an advisor does. Most of what we do is what we call a first party transfer where I’ve got an that’s got your name on it.

It’s a, call it a checking account and another account that’s got your name on it and it’s the same name And it’s a brokerage account and we’re moving money between two accounts that have the same owner And this is a like title that is verified at the custodial level Meaning the custodian is the investment company that holds investor assets So first party transfers are as safe as it gets Cause you’re moving money between two accounts where the owner is the same person Third party transfers Are where there is hazard where you’re sending money to somebody that they don’t you can’t get that money back once you send it There are a lot of legitimate purposes for third party transfers If you’re making a payment if you’re moving money into escrow if you’re buying a house If you’re, you know transacting in some other way, but there is a danger So if you’re working with an advisor what you’re supposed to do as an advisor is understand the rules [00:11:00] This is a third party transfer.

We need 17 layers of verification to make sure that this is properly being handled and understanding that the wire instructions have been quadruple checked and the account number and the routing number and all of these things. The for the credit, if there’s, a different account, this needs to land in like that has all been thoroughly vetted in most cases, really.

if there was a mistake, it would just bounce back or there’d be an error and you’d have to retry it. But third party transfers are where there are problems. Potential problems. And in these scam examples, third party transfers are what was affected in order to get the money out of the hands of the rightful owners of the money.

And then it goes to, offshore wherever, and it’s into the ether. So whenever you’re doing these kinds of transfers, understanding the difference between first party and third party, and if you have a third party transfer happening, basically just never do it, don’t do it.

Jimmy Turner, MD: so I remember the first time I went to do a wire transfer at my bank for a car and they were like, are you sure [00:12:00] this is going to the right place? And I’m like, what do you mean? like the way that they said it had like a certain amount of gravity to it that made me pause. I basically said, Hey, so if I, if I’m wrong, what happens here?

They’re like, you lose your money. And so they’re like, double, triple, quadruple check that this is going to the right place for this car. And, and so it was. The first time that I ever recognized like that third party transfer thing. And it was, I mean, even online, if you try to make a wire transfer, there’s like flashing bells and warning signs and like an extra box will pop up.

And it says are you sure you want to do this? Have you verified the information? And just recognize if you send it to the wrong person like they don’t have to give it back which is fascinating and a lot of times these scans They will wire the money and then that money is immediately taken from where it is to an offshore account So you can’t even find it.

It’s not traceable anymore, which In today’s technology is a little mind blowing to me that that’s even possible that you can’t trace money to An offshore account, but apparently that’s a thing

Justin Harvey, CFP: There’s a lot of reasons for that related to where [00:13:00] people of significant means like to keep their money and the privacy associated with those international locations. And you can just quickly Google. There’s a couple of hotspots that are sort of national, that the banking rules in these countries are because of the incredible amount of privacy.

It makes it impossible to figure out what’s going on.

Jimmy Turner, MD: I didn’t verify it before the show, but I saw a post saying that somebody was caught by the IRS for like a 256 million basically tax scheme. and it had to do with offshore accounts and it was kind of leaning towards that. But so, so I thought it might also be helpful, Justin, just to kind of quickly mention a few ways that these scams may occur.

so one way is something called a romance scam, and these are scams that have increasingly become more prevalent since COVID 19. You know, people are looking for companionship online and like dating sites and all that stuff has popped up and obviously become a big part of our culture nowadays. as more and more people are meeting online and eventually what they’ll do from these websites or these dating apps is

[00:14:00] start asking for money under various pretenses. and they have cases of like people in their 60s losing a couple hundred thousand dollars to somebody who claimed to be a U. S. soldier that was overseas and needed money, needed help. And, and so they found them through this online thing. and for me, this sounds silly, but having kids that are young that play video games online where they can talk to other people.

And just recently having to have a conversation with my 10 year old and being like, Hey buddy, just cause they say they’re a 14 year old in California. Doesn’t mean that they are a 14 year old in California with a voice that’s as deep as mine Like maybe that’s not true maybe it’s a 47 year old sleazy guy that you don’t really want to be, having communications with and And my wife kind of losing it when that happened, by the way And so, these things happen right where people represent something that they’re not online and if there’s you know layers of Just being obscure where you can’t see the other person that can happen

Justin Harvey, CFP: Yeah. And,it’s a quick sidebar. We’re both parents of. Young people. And I, I’ve something [00:15:00] that I’ve read a lot of parenting books and podcasts and things. And I, something that I have recently heard that has stuck with me and I’ve really taken a hold of is we do a lot of time, we spent a lot of time and exert a lot of effort worrying about like the person who’s going to snatch your kid off of the street corner.

And not a lot of time and effort understanding the dangers that are posed to your kids online because you’re much more accessible online with all different apps. And even if you’re in a school, unless you’re going to one of those schools from the Silicon Tech executives where they don’t allow the kids to use iPads and phones.

If you’re going to like a normal school where you have a lot of access to electronics that there’s, the dangers are much more manifest.

Jimmy Turner, MD: So there’s a book written by, I haven’t read it yet, but I’ve had it recommended to me by multiple people, I’m going to read it at some point. by the same author that wrote The Coddling of American Minds, who wrote this book about anxiety. Is that the one you’re referring to?

Justin Harvey, CFP: That’s one of several.

Jimmy Turner, MD: Yeah, yeah, yeah, yeah, so I actually, I understand the premise of the book, and some of it was in a prior work of his, but [00:16:00] I think it’s a fascinating thing, right?

So we spend so much time Basically worrying about getting snatched at the park so we don’t let, Johnny or Susie have free play where they can learn how to fight fair and, get in arguments with kids and learn how to resolve those and, develop the skills that are required to do those things.

but then we don’t monitor them online at all. And, and so, actually because of his work, we’ve tried to do the exact opposite. My son and my daughter are allowed to go do things without our supervision. And some people might look at us like we’re crazy, because we allow them to do that. and then we, like, my 8th grade daughter has a phone that can text, has Spotify.

She can call. It doesn’t have any social media, doesn’t have YouTube, doesn’t have email. All of her friends do. And you know what, I think that’s actually really healthy for a variety of reasons. and, but yeah, and honestly, after having that conversation with my daughter, she totally understands.

she doesn’t give us a hard time about it at all. and so, we’ve gradually kind of given those things to her, over time. But part of that is, protecting, and there is a bit of a scam out there [00:17:00] that, Hey, if you send little Johnny to the park, they’re going to get abducted. And,go look at the numbers.

go just find the numbers for, like, how often that actually doesn’t happen. and maybe you’ll be less, less scared, but you do need to know when danger is present, there are opportunities for that. and this, goes along the same lines as what we’re talking about today. So, another example, Justin, that I thought we, we would talk about is gift cards. Have you seen this happen yet?

Justin Harvey, CFP: Yes.

Jimmy Turner, MD: Yeah, tell me, tell me about the gift card scams.

Justin Harvey, CFP: Well, I have seen it linked to the other physician specific scam that I mentioned earlier, but, the way it’s usually sort of like couched. Okay, you’re there’s a problem you’re in contempt of court and the fee is X and if you don’t Pay the fee in the next, you know, whatever two days then we’re gonna send the sheriff to your department and we’re gonna have you arrested and that’s gonna get sent to the medical board and We’re gonna like all of the things that Get the doctors who are super conscientious and have only ever, been very straight laced.

Cause that’s the only way you can become a physician. [00:18:00] It just, they envisioned this whole world come crashing down and then their guard is down at that point. And then what happens is, okay, well you can either. And they gave him like two or three, well, you could wire money, but that’s, 72, 72 hour turnaround from escrow.

And so that’s not going to work in time and you could do a personal check, but yeah, so, given the constraints in which we’re operating, we, what we suggest is you, use the prepaid piece of gift cards, which you can get at any retailer and,just send those to whatever address and we’ll make sure that, we let the sheriff know to not come arrest you.

Jimmy Turner, MD: Sometimes I’ve heard that they, they’ll tell them to read the numbers over the phone to make it happen more quickly.

Justin Harvey, CFP: Yes. Yeah, you’re right. and you scratch off the little code. Yeah, you’re right.

Jimmy Turner, MD: And then there’s no way for them to tell that it’s not your gift card.

Justin Harvey, CFP: right. Yeah.

Jimmy Turner, MD: Right. And so, it’s, I mean, it’s definitely out there. And another one is,social security scams. So people impersonate social security administration and claim that there is an issue with, the benefits.

And,there are examples out there where. Social [00:19:00] Security number was involved in criminal activity and their bank accounts were at risk and so they needed to quote unquote secure their funds, which sounds like this may be kind of what the, the reader that list reached out to us was experiencing where the people were like, Hey, your money’s at risk, so we need to move this to a secure FBI location and it came about that wasn’t really an FBI representative or somebody from the Social Security administration

Justin Harvey, CFP: Yeah. The thing that really raises my blood pressure about this is this is one of the facts of life is that as you age, you become significantly more vulnerable and basically every facet. but one of them is cognitively, you’re just less suspicious. You’re less cynical. You’re more trusting. And there are a whole, boiler room call centers out there filled with people who their job is to Rip off your mom, your grandma.

And when I, Oh dude, these things just get me so angry and aggravated. But the fact is, you [00:20:00] know, sure. Listeners like to this podcast, if you’re listening to this podcast, you’re probably cognitively not in a place where you’re experiencing the decline of your. Natural suspicion and obviously knowledge is power.

So being informed about how these things work will help to calibrate that suspicion. But your mom, your grandma, the people who you care about and you love and who have saved all their money. And to take it to like the naked economics for a minute, the people who maybe are going to leave you money one day, like they’re probably at risk.

Jimmy Turner, MD: and, or be dependent upon your money if they don’t.

Justin Harvey, CFP: right. That’s right. And if mom or dad has this happen to them, all of a sudden, that’s your problem. And the money that, Was going to in some measure perhaps come to you is gone to Grand Cayman and that is so it really is It does behoove everyone listening to this. And I’ve even thought more about this for not only my clients who I’m obviously like actively safeguarding, but I talked to my clients now about what are your parents doing and do they seem like they’re getting [00:21:00] to a place cognitively where their natural levels of suspicion are starting to diminish and they’re becoming more trusting and they may fall prey to some of these things.

And how do we get the. Have the conversation with them about it and be put some protections in place as much as possible to help protect against any fraudulent activity.

Jimmy Turner, MD: Yeah, I think there’s certainly things that we’re more susceptible to as we get older But I think there are some things that we’re susceptible to because we’re physicians, right? and I’m just gonna throw this out there because it may offend some people I’ll just preface this but you know people use the term like Ponzi scheme and You know the most famous one being you know made off some Bernie Madoff, you know promised all this money This consistent returns and all the stuff And then found out that it was none of it was real.

and I, I kind of feel the way some same way sometimes about real estate stuff in the physician finance space. And so I’m going to read you the descriptions of what it means to be a Ponzi scheme. And then let’s see if we can apply that to some of the offerings that are put in front of physicians.

Right? So one of them is high returns with little or no risk, right? You give us the money and this is [00:22:00] the, the really high IRR that, you’re guaranteed to get from investing in this opportunity. Overly consistent return so investment values typically fluctuate with market conditions, so they may say hey You’re gonna get consistently high returns regardless of the market or maybe it’s you know It’s just safe from other things are happening lack of transparency is a big one, right?

So things are kind of hiding behind closed doors and you try to ask for things or get some transparency or information about it It’s generating not much of an answer and then it’s tough to get payouts so when investors have trouble withdrawing their money or encouraged to Reinvest instead of taking cash payouts.

Justin Harvey, CFP: It may indicate a Ponzi scheme. So you’re like looking at these four things like okay someone’s promised me high returns Right with not much risk consistent returns There’s not a ton of transparency And you have a tough time getting the money back like to me. That sounds an awful lot like a real estate syndication I mean, maybe i’m losing my mind but fired.

Jimmy Turner, MD: i’m serious like and i’m not saying that all of them are You

Justin Harvey, CFP: Yeah.

Jimmy Turner, MD: But you really need to do your due diligence before you hand 50 grand to somebody [00:23:00] who two years later says, Hey, we lost all the money.

Right, and you don’t get any of it back. And you might look at that as a failed investment opportunity. I would look at that as potentially a scheme, right? A scam of some kind. And, and those happen. I know very personal stories from people. I know where that has happened.

Justin Harvey, CFP: Yeah. Yeah. And always be suspicious of the, affinity group marketing. So whenever you’re going in. The same problem with your guard down, lacking the natural suspicion that you should have when you’re about to plunk down tens of thousands of your hard earned dollars, which, the physician community, once you’re in, there is, there can be, I have observed a lack of suspicion between white coats.

That should exist if you were dealing with Oh, the sleazy finance guy who’s trying to sell you some hair brain scheme. of course you’re going to be suspicious of that guy. and this is for me, Jimmy, why liquidity is so important. How long does it take me to turn something into cash? And if it’s going to take me longer than [00:24:00] like a couple of days, then I need a really compelling reason to have it.

Make up a prominent part of a client balance sheet. Now there’s obviously good reasons to have illiquid investments and I’m a business owner. Many of my clients are too. You can’t sell a business tomorrow. That’s a good example, but real estate syndications or other illiquid types of investments, especially if they’re opaque, you don’t understand the fees.

You don’t understand how long it takes to get your money back. There’s a lot of, mine landmines associated with those types of investments that are not usually understood by the average investor. And if you got your, your buddy is in the OR or in the doctor’s lounge talking about it, like you need to be more suspicious and.

A lack of suspicion in those circumstances can cost you dearly, unfortunately.

Jimmy Turner, MD: Yeah, I’ve seen it happen. And so I just want people to be aware. Hey, these things are happening, whether it’s a gift card scam or the FBI needs to protect your money, or it’s a real estate syndication is put in front of you. That’s promising, 14 percent returns, that you need to erase your suspicion and be aware that there are people out there that are [00:25:00] trying to take advantage of you.

And guess what? You have a high amount of money. You have a high income. That means you are susceptible to, to pitches like that. and that’s why. I think it’s good advice that, something’s too complicated to understand. You probably shouldn’t invest in it just by and large, no matter what it is.

and so, but your guard being up is definitely the first order of operations there.

Justin Harvey, CFP: And secondly, it’s good to check yourself to say, am I being motivated by greed? And that’s a kind of a sobering thing. And that’s something that people would even want to admit, Oh, I’m greedy. And I think people who aren’t naturally money grubbing. can be in a moment of, like a seeming opportunity where there’s a shiny object out there.

There can be a greed instinct or greed reflex. Oh, I can get something that isn’t going to cost me as much as it normally would. It’s a good deal. You know, you can frame it in this, using this language that is like constructive. But if, if it seems like there’s a, an inequity in terms of the trade of your dollars aren’t going to get back, that should put you, [00:26:00] even your yourself, This could be a greed motivated response.

When I’m motivated by greed, I’m not using the normal level of suspicion that I should be using and therefore need to beware.

Jimmy Turner, MD: Yeah. And that actually reminds me of one other thing I’d like to mention before we head out, which is that some of the opportunities that are given to you are given to you because you’re quote unquote, what’s called an accredited investor, or you’re a sophisticated investor. And the reason that there are delineations there Is because the people that make these rules want to make sure that you have the means to sustain that kind of risk So said differently if you are considered an accredited investor and you’re given an opportunity that only Accredited investors are this isn’t like the platinum club like you’re like you are like platinum level So you get these like rare opportunities What is really saying is that this is a risky investment and that the people that make the rules have decided that this is such a risky investment.

We’re not gonna make it available to people that don’t make less than X number of dollars or X number of net worth because they wouldn’t be able to tolerate the kind of outcome that could be potentially coming from that kind of investment. So, just as you are presented said [00:27:00] opportunities, being an accredited investor isn’t always a good thing.

Sometimes it gets things put in front of you that are riskier than are necessary to take.

Justin Harvey, CFP: Well said. Yeah. Being able to sustain a big loss is what you’re describing. And that’s one of the, one of the protections, the investor protections that are put in place. If you’re buying into something illiquid, you need to be able to make a couple hundred grand, or you need to have a net worth of a couple million bucks.

Cause if this thing goes to zero, then you won’t be on the streets and that’s the regulatory authorities trying to look out for the investor in this context.

Jimmy Turner, MD: Yeah, absolutely. Alright everybody, as we head out, please make sure to share Money meets Medicine with your friends and colleagues in medicine and to let them know that you can get a free copy of the Physician Philosophers Guide to Personal Finance on money meets medicine.com. completely free for you.

And you can also get a quote for disability insurance if you’re looking to snag that as well. Appreciate all the community out there and thanks again for this listener reaching out and sharing their story. We always love hearing from the community, so if you have a story, you have a question, reach out jimmy@moneymeetsmedicine.com.

Always happy to bring your ideas and thoughts and perspectives onto the show. [00:28:00] Cheers.