How to Know Your Assets are Safe

We want to address an issue that’s occasionally on the minds of clients, depending on what’s in the news: Ponzi schemes. How do you know your assets are safe? How do you know your future is secure? How can you be sure you’re working with a credible financial advisory firm?

When people hear about these Ponzi schemes (probably the most famous was the one involving Bernie Madoff about a decade ago), it brings to mind the key issue: How do I know that my assets managed by a wealth advisor are safe and they’re not just going to disappear into thin air, which is what happened to some people in the Madoff scandal?

We sat down with Lynnette Okwuonu, chief security officer at Linscomb & Williams. She spends a lot of time on internal security matters and is able to address these concerns.

From our conversation, I want to share some color around how to correctly think about this risk and these issues. This is of concern and something that clients should be questioning of their advisors. They do need to know that they’re working with legitimate advisors. The Madoff scandal was about a decade ago but is something that people certainly still remember.


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What is a Ponzi Scheme?

In a Ponzi scheme, often times you are promised high returns with low risk. However, in reality, an “advisor” is taking the funds of the newest investors and basically paying out a portion of it and calling it “profits” to their earlier investors. As such, there is distortion in the reporting, as well as in knowing whether an investor really has assets at the firm.

What is the Best Way to Protect Yourself?

Employ a financial advisor who does not also provide the custody services, meaning the advisor’s firm is not actually holding the money that clients entrust for management. Instead, the advisor uses independent, third-party, trusted firms in the industry to hold client money.

For example, at Linscomb & Williams, we are currently working primarily with three of the top four most trusted RIA custodians, firms like Schwab, TD Ameritrade and Fidelity. These are well-recognized names. They have solid reputations. They’re reputable companies that are independently audited and regularly audited by the large National CPA firms in the industry.

Why is an Independent Custodial Firm So Important?

What this means for clients is that there are two independent sources reporting on the quantity and value of client assets. Clients can get a statement from the financial advisor and can compare that statement to the one they receive from the custodial firm. Thus, clients are getting independent validation of what the financial advisor is reporting to them.

This was not the case in the Madoff scandal. And it is why the Madoff scandal lasted so long and couldn’t be caught – basically, both hands were in the bucket, and Madoff was able to manipulate the information he provided his clients. His victims were receiving statements they believed were reporting their assets, but in essence, there was falsification of the information. There were no checks and balances.

That doesn’t happen at Linscomb & Williams or with an independent financial advisor using third-party custodians.

What About Cyber Attacks?

This is another fear that’s on a lot of investors’ minds today. People worry about things like an email coming in that may look like it’s coming from us that requests a money transfer into a different account, or that we receive an email “from them” requesting us to send money to someone.

This is a very real threat. There are a number of things that Linscomb & Williams does to prevent that from happening with our clients.

First of all, we will never take instruction from an email without verbally contacting our client, authenticating an email, and verifying that it was our client who sent the email and that the instructions inside the email are legitimate. We do that faithfully 100 percent of the time. And we have caught some fraudster activity by going through this activity. We consider this a “best practice” and clients should ascertain with their current financial advisor that similar protective procedures are in place.

What You Can Do to Protect Yourself

Linscomb & Williams takes many steps to protect our clients against fraud, but there are things that you can do as well to ensure you are keeping your assets safe.

First, never send personal information by email. Ever. This includes Social Security numbers, tax returns, driver’s license numbers, birth and death certificates, military discharge papers, and user names and passwords.

Also, never respond to an email that appears to be from your advisor that requests this type of personal information. We will never ask our clients for this type of information without a secure way to send it to us. If you’re questioning a correspondence that may look like it has come from us, call us before responding to verify. It’s better to be safe than sorry when it comes to your finances.

Second, know what fraud looks like. There are cues that should alert you to email fraud.

For example, many fraudulent emails (and phone calls) often request information immediately to create panic and confusion. Scammers know that it is during these times that even the most grounded individual will make an emotional decision.

A lot of misspellings in an email can also be a warning sign. In addition to showing unprofessionalism, many scammers know that certain words will get their fraudulent email blocked by spam filters, so they misspell words so the email will get through to your inbox.

A URL can also tip you off. URL addresses that begin with “https” as opposed to just “http” are secure sites. (The “s” indicates a secure page.) If you’re being asked to log on to a site to provide sensitive information and the site is not secure, this indicates a red flag.

Lastly, if you’re unsure about an email that looks like it came from your financial advisor, call to verify! Don’t use the number that shows up on your caller ID, but call directly.

Common Scams

Email scams come in many forms. Be especially cautious of:

  • Friend requests
  • Healthcare advertisements
  • Job search scams
  • Frantic requests for finances or an immediate response

It is also wise to keep your personal information secure. If you keep your information online, make sure to use complicated passphrases instead of passwords. For example, instead of using your birthday, use a phrase with a variety of letters, numbers and special characters. A good passphrase could be IL0veLivin6InTex@s! (Easy to remember: “I Love Living In Texas!”).

Keep your passwords in a secure location. And shred old documents.


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J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams is Linscomb & Williams' Chairman.

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Investment Advisory Services are offered by Linscomb & Williams, an SEC registered investment adviser, and a subsidiary of Cadence Bank. Linscomb & Williams (L&W) provides financial planning, investment management, and retirement plan and investment consulting services. L&W is not an accounting firm, and does not provide tax, legal or accounting advice.

Information expressed herein is based upon opinions and views of L&W and information obtained from third-party sources that Linscomb & Williams believes to be reliable, but Linscomb & Williams makes no representation or warranty with respect to the accuracy or completeness of such information. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.