This essay provides a brief description of fraud and exploitation risks that investors are more and more likely to encounter. It concludes by outlining a coordinated effort, encompassing several new programs, which Schultz Collins, Inc. [SCI] has begun to implement. Our goal is to keep your money safe.
The essay is, in some ways, a supplement to “What Investors and Trustees Should Know about Investment Advice” (April, 2019) which can be accessed here. That article detailed a pervasive and systematic risk to investor wealth from firms operating in the financial products and services industry. This risk can become acute when investment firms employ an agency standard of practice, rather than a fiduciary standard of practice.
By contrast, this essay focuses on the risk of exploitation by individuals either within the industry (e.g., financial fraud by a rogue broker or investment advisor), or outside the industry (e.g., financial theft by a friend, relative, caregiver, or ‘scammer’). To make the analysis manageable, we limit the discussion to retired investors.
Although retired investors are particularly vulnerable to the sorts of risk we discuss below, all investors should be aware of them.
 Even firms asserting that they follow a fiduciary standard of practice may draft Investment Advisory Agreements designed to excuse them by contract from important fiduciary duties. See, for example, the analysis of Steve Fast (a partner of the Day Pitney law firm), et al.: “Latent Liability: The Investment Management Agreement Lurking in the File,” Representing Estate and Trust Beneficiaries and Fiduciaries, 2017. Mr. Fast cautions estate and trust attorneys to review client Investment Advisory Agreements lest they contain provisions that permit brokers or investment advisors to engage in opportunistic behaviors.