My self and our CEO have just come back from a meeting where a representative of an Insurance company wants us to retail their products to our current, prospective and future clients. They boast higher commissions than our current insurance providers, cheaper premiums to our clients and a bucket load of money in the bank ready to pay claims. After the meeting, which consisted of a lot of unanswered questions, we used the internet to do some quick research and due diligence and quickly spotted that it was all a scam. Fortunately we can spot a scam pretty quickly and can shield our clients from being burned however the unsuspecting consumer out there may not be able to, so please make note of the top 5 ways to spot a financial services scam:
1. Too good to be true
This is true for every industry, product and service and always will be. If it sounds too good to be true, it probably is. If an unheard of company can suddenly offer cheaper premiums, abnormal returns or similar, raise your first flag. Why can the huge banks and insurance providers who pour millions of dollars into product development not bring out such an effective product or service? Usually because it is not possible.
2. Hiding from the internet
Any reputable company will have an online presence these days. If they do not, why not? They may have a glossy website, but how long has their website been active and is it the same amount of time as their brochures suggest? Whois.net will help you find this information. Check their office address, call their office number and ask some relevant questions.
If they do have all of these credentials, still be ready to raise your flag and whatever you do, do not trust the first page of Google results to be your only research. They are many online companies specialising in hiding and reducing the ranking of negative reviews and scam reporting.
We suggest you use websites like PissedConsumer.com and RipOffReport.com and search which ever company you are suspicious of. However, you must be aware that sometimes insurance companies do get a bad rap when so called advisors have sold the product in an unethical way. We see this a lot with the company Generali. Generali are in no way a scam, rip off or anything negatively similar however there are bad reviews online where advisors has over-promised, not declared their fees properly etc thus Generali get a bad rap. This is the advisor that has acted unethically not the insurance company.
All insurance and investment companies should be regulated somewhere, if they declare they are regulated here in Indonesia, the UK, Cayman Islands, Mauritius or wherever, find the relevant regulatory body online and search for said company in their directory and contact them if you cannot find it listed.
You can never do to much stalking to protect your money and make sure you are dealing with the professionals.
3. Ask around, ask everyone
Finances are extremely personal and you may not want to talk about it with friends and especially strangers, however we suggest changing this attitude. Before getting in bed with an insurance company, investment provider or similar firm ask everyone and anyone what they know about them. Try to find some long term customers if you can. Customers that have already had successful claims or physically had their investment returns would be your best type of testimonials.
4. Don’t understand? Maybe you weren’t supposed to
If an insurance agent, financial advisor or even a friend explains something to you and you do not understand it for whatever reason, close your wallet now. An experienced individual selling whichever product it is, should be able to explain the ins and outs with high transparency. Phrases like ‘don’t worry about that’ are the worst things you want to hear. If it’s insurance you are looking at, go through the benefits and exclusions with a fine comb and never rush this aspect.
5. Fees, fees, fees
A very common misrepresentation with regards to investments is the fees that are being charged, particularly exit fees. A common trick is for the fees to be declared verbally so unless you have a secret voice recorder, means absolutely nothing. Be careful what you sign, read all the terms and conditions. If someone tries to talk in a distractive manner while you are reading such important declarations, raise that flag! Remember some people are very skilled in this area of misdirection and misrepresentation, always have your guard up and only commit money when you personally are 100% happy.
Hopefully this message hasn’t put you off buying insurance and investments. These products are important to your financial planning but we simply want to make sure you do not waste your hard earned money on scams and bad advice. Speak to the professionals at www.gms-financial.com