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Trust, but verify your product providers

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Financial advisors are attractive fraud targets. Why? Because they are the gatekeepers through which new business flows. To open that gate, scammers often hold themselves out as legitimate insurance companies or investment providers, when in fact they have failed to secure the requisite insurance- or securities-department approvals. When advisor clients’ are left holding the bag, advisors will often get punished for not doing their due diligence. Don’t let this happen to you.

According to the Florida Office of Insurance Regulation (FOIR), scammers are good at fabricating marketing materials that appear authentic in both the health-and-welfare and investment areas. They base their appeals on dramatic cost savings or higher than normal investment returns, but their claims often fall short in reality.

How do you protect your clients — and yourself — from sham companies? FOIR provides the following tips:

  • Beware of health plans that require consumers to join trade associations, unions, or affinity groups to become eligible to buy coverage. Many such “multiple employer welfare arrangements” are legitimate, but not all.
  • Be dubious of guaranteed-return, get-rich-quick investment schemes. Many of these offers promote unregistered communications equipment, real estate and land-development programs. If it sounds too good to be true, it is.
  • Make sure to document the full name of the product provider. Then search for this name on all relevant regulator websites. If the site’s search function returns companies with similar, but not exact, spellings, don’t assume you have a match. Many scammers use variations of licensed provider names to enhance their credibility.
  • Research the websites to determine the different levels of authority granted by regulators. Make sure the company has the right authority for the type of product it wishes to sell.
  • If a company isn’t listed on the website, but it insists it does have authority, call the regulator to double check.
  • Companies often lose the right to operate in a given state. So periodically verify your carriers authority to prevent future problems.
  • Finally, if you’re the target of an unlicensed pitch, notify your state regulators. They will want to issue a cease-and-desist order to the company.

For more from Harry Lew, see:


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