-- Despite more than three years and a powerful new bull market, the financial meltdown of 2008 still has many Americans worried about their retirement future.
A third of adults of all ages say that running out of money is their top retirement concern, according to a survey that Franklin Templeton Retirement Income Strategies and Expectations released last week.
Older Baby Boomers will fare the worst because they have less time to rebuild their nest eggs before retirement. And facing that looming deadline, many of them need financial help.
But investing is risky enough without worrying about investment scams. Sen. Charles Schumer, D-N.Y., has said that Bernie Madoff's Ponzi scheme is an extreme example of the many scams lurking out there that can trap unsuspecting investors. The Securities and Exchange Commission filed a record 735 enforcement actions in the 12 months ended Sept. 30.
That doesn't mean that you can't find sound, unbiased advice. "The vast majority of investment professionals are hard-working individuals who look out for the interests of their clients and customers," says Gerri Walsh, vice president of Investor Education at the Financial Industry Regulatory Authority (FINRA).
But to find a reliable broker, adviser or financial planner, experts say, there are some guidelines that can help you avoid the financial pitfalls.
Common consumer mistakes
•Failure to check out the background of a financial professional. "People just don't do any research at all," says Mike Alfred, CEO of BrightScope, a provider of independent retirement plan ratings and investment research. "They rely entirely on their golf buddy or a friend from church who say this is a good guy."
•Relying on professional designations. Just because a broker has a lot of diplomas, has lots of acronyms on his business card and drives a fancy car doesn't mean you should rely on him. "Those things can all be faked," SEC Chairman Mary Schapiro says. "You have to be skeptical."
•Buying investments you don't understand. Many products today are very complex and some brokers can't even explain them very well. "If you don't understand how it makes money for you, what fees and commissions or costs you have to pay, then you shouldn't be investing in that particular investment," Walsh says.
Persuasion tactics to avoid
•Affinity fraud. This occurs when con artists prey on members of a certain race, nationality, religion or other group. Because the average person doesn't have time to research investments, they often willingly rely on a fellow group member. The swindler hopes to lower the investor's guard and exploit their trust.
•Reciprocity. In this scam, someone offers a small favor in hopes of a big payoff. For example, senior citizens are often invited to free lunch seminars that include information and sales pitches. "They are counting on you to feel that you owe them something," Schapiro says.
Securities regulators have examined more than 100 free-meal seminars and found that half of them contained claims that appeared to be exaggerated, misleading or unwarranted investments. And 12% appeared to involve fraud, according to FINRA.
•Scarcity. Whether it's a car, a house or an investment, a pushy salesperson creates a sense of urgency. "The idea is that if you don't act quickly, the opportunity will be gone, and you should invest quickly," Schapiro says.
Steps to finding a good adviser
•Know what your goals are. The most fundamental goal is having enough money to live on in retirement. But others also may want to provide investments and assets for their heirs. Different professionals can help you with investment products or tax and estate planning.
•Do comparison shopping. Look for professionals who seem to meet your goals. Then check out their backgrounds.
There are a number of ways to do that. You can go to BrokerCheck, which is a tool on FINRA's website. It allows you to search for brokers and their firms that are currently or previously registered with FINRA to learn about their education, where they have worked previously and whether they have a history of disciplinary actions or complaints.
You also can get information from your state securities regulator.
And a website, BrightScope Advisor Pages, was launched this year. It lets consumers easily search for advisers by city and compare characteristics that are important when shopping for one. And it makes public disclosure data accessible.
The website plans to offer a way to score the many different acronyms that advisers can have. "It's alphabet soup," Alfred says. "Some designations only take two or three hours of study. Things like CFA and CFP are much more rigorous."
If you are considering a financial planner, you can go to the Certified Financial Planner Board of Standards website. It lets you look for planners based on issues such as their specialization and compensation. You can also see if a planner has been publicly disciplined by the board.
•Interview advisers. Bring many questions when you meet with an adviser. Too often, consumers are embarrassed to ask for more details or a better explanation.
Walsh suggests the consumers use a script like this: "Back up one second and bear with me. How exactly does this work? Exactly how does this make money for me? What exactly are the risks? What exactly will I have to pay to own this investment?"
FINRA also has a risk meter and a scam meter. If investors had run Bernie Madoff's investments through the scam meter they would have seen some red flags, Walsh says.
What you should ask your financial planner
• What experience do you have?
• What are your qualifications?
• What licenses do you have?
• What products and services do you recommend?
• Will you be the only person working with me?
• How are you compensated? For example: Do you charge a flat hourly rate (or "à la carte" rate) for services? Is the fee a percentage of assets under management? Do you receive a commission or a referral fee paid by the product or service providers that you sell?
• What organizations are you and your firm regulated by?
• Will you provide a written agreement that details the services and fees that will be provided?
Previous stories in USA TODAY's Retirement Review series: