Episode 366 - Avoiding Investment Scams

23:37I just won't do that. You just won't. This one, one of the people who had received this scam email replied initially because they weren't sure if it was actually me or not. At first they said they thought it was pretty cool. Then the second email, it started to get fishy. So they replied and the scammer sent a follow-up offering to share a comprehensive walkthrough, including actionable steps, key insights from the latest research, and some of the most promising investment opportunities with strong potential for returns. So again, all the hallmarks of a scam. I would guess this was another pump and dump just based on the promising investment opportunities comment.

24:11But this one I never followed up on because the email address that was being used was reported to and shut down by Google, which is great. I mentioned earlier, but I do want to mention again that on impersonation, so that was an email, but I have heard from people who've gotten DMs, Twitter DMs with voice notes using my voice, an AI impersonation of my voice, trying to convince people of my identity. And they could probably do it with video too. I've seen great realistic video avatars. If I ever DM you a video trying to convince you to buy a specific stock, you should know it's not me. So these scams are all bad, brutal.

24:44But this last one drives me completely nuts. The YouTube comment section, fake financial advisor, I'm pretty sure pig butchering scam. I'll talk about what that is later. They drive me completely nuts because they will not go away. Every time I see them, when I'm reading through YouTube comments, I report them and block the user, but it doesn't matter because they're just going around. They go and create computer-generated usernames and accounts, and it's just impossible to stop them. Is this all like automatic fraud that's going on, or is there someone behind it, do you think? Oh, there's someone behind it, 100%.

25:13I don't know who or where or how they're doing it, but someone somewhere is doing it. I interact with them. This is another one where I followed up on the scam to see what was going on here. These ones, in many cases, they're identifiable easily because they're very general comments. It'll start off with a very generic statement, but I have seen some more recently that are very specific to their content. Like the one on individual stock risk that we did recently, there are some of these scam comments. They have a few words or sentences that are related to the video and then they get into the scam content.

25:45They're still usually pretty generic. They often reference either a loss. I lost$200 ,000 or a specific dollar amount that they've achieved. I just hit$3 million or whatever. I didn't dig into the psychology there, but I'm guessing there's some psychology behind mentioning those specific dollar amounts because they all seem to do that. Clearly, the scammers have figured out some psychology related to that. It must be working or they wouldn't be doing it. Here's one example, one of these scam comments. You can see how generic it is. This is a quote from the scam comment. This video really hit home for me.

26:17Retirement has been such a rewarding chapter of my life. My wife and I worked hard to get here and we're incredibly thankful for where we are today. Now we're debt-free with a net worth of over$3 million. There's the specific dollar number. And that investment income supports us every week. Now, this was on my video on the historical comparison of renting versus owning in Canada. So in this case, it's not at all relevant to the content. It's just super generic. But if you're reading through the comments and you see this, you might wonder how this person was so financially successful. And so this is where their so-called financial advisor comes in.

26:49It's always a very specific full name. I think it's because links are typically caught in YouTube spam. comment filters. I have a filter where any link can't be posted. It'll automatically get flagged. I never check the flagged comments. If it's got a link, it's gone. It's never going to see the light of day. The scammers figured that out. They don't post links. They post full names, first, middle, and last name of the supposed advisor because then when you go and search it on Google, you're not going to get a whole bunch of hits. What they do is they make a website using that full name. So that searching that name brings you to a website and that website is going to list credentials, testimonials, awards, licenses, and all that kind of stuff, all fake.

27:32One really tricky thing that they do though, and I haven't validated that they'd always do this, but I have looked at a few where they did do this. They'll use the name of an actual registered investment professional so that the name shows up in registration searches. Maybe these are mostly US-based, so it'll be like FINRA, but they'll link out to FINRA broker check. So they'll have this fake scam website with fake contact information, everything like that, but you can click on the FINRA broker check link and it'll take you to the actual page for the real advisor with this name. Super, super sneaky.

28:03So the name's not fake, the person is fake. Correct. They're just impersonating a real person. That specifically, likewise with using my name, I guess, is really problematic because one of the things that you can always do, and we've said this in the podcast many times, Cameron, if you want to verify whether someone offering you investment advice is legitimate, you can look them up on a regulatory website. You can see if they are registered to give investment advice. In Canada, we have aretheregistered.ca. So you can search for the registration of anyone registered with securities regulators in Canada.

28:35But in the case of this fraudulent advisor or my WhatsApp and email impersonator, that stuff doesn't really help. You only look me up and yeah, I'm real, I'm registered. But if you're not talking to the real me, it doesn't help. What I would say is that professional financial advisors will probably not communicate with you through WhatsApp or Telegram or an email address that is not associated with a registered firm. If in doubt, if you go to aretheregistered.ca and look me up or look Cameron up, you'll see the contact information with the securities regulator for PWL Capital, call that phone number and verify whether whatever interaction you're having is legitimate.

29:12Now, after years of seeing these comments, I recently decided I would contact one and see what happens. So I went on this fraudulent website. And again, if anyone's concerned about security, I did use a throwaway email address from a privacy-focused email provider. So I'm not concerned about them finding the real me. I reached out to one of these fake advisors and just said like, hey, I saw your name online. Just wondering how this works, something like that. They asked me if I've ever worked with a financial advisor before. They asked me what active trading accounts I have. They asked my annual income and whether I'm an aggressive or reserved investor, the purpose of my investment and my investment budget.

29:51Pretty detailed. So I replied and they told me that they're taking their next batch of clients in Q2 2025 and that I could join that batch to begin investing and earning. And the pitch was that they are a multi-market broker that trades across three different markets while majoring in digital currencies, of course. So I said I was interested, of course. And they sent me a PDF detailing the offering. And again, if anyone's concerned about security, I did not open the PDF. I only previewed it through that secured privacy-focused email provider. Didn't download it. For anyone not aware that PDFs can contain malicious code, I have no idea what the actual scam is?

30:30Is it to get me to download the PDF? Well, I didn't do that, but it is worth being careful because PDFs can contain viruses and malicious code. Now, this PDF that I received, it is honestly incredible. It's like a masterclass in what to look out for in an investment scam. Sorry for this word, Cameron. It contains huge amounts of financial bullshit. Now, if anyone, Cameron included, cringes at me using that word. I'm good. It is defined in a 2022 academic paper, Individual Differences in Susceptibility to financial bullshit as seemingly impressive verbal financial assertions that are presented as true and meaningful, but are actually meaningless.

31:06Listen to this. This is wild to read. This is the explanation of the trading strategy from this advisor. Are you ready? Fire away. Strap in. Okay. The quid pro quo strategy functions through a simple economic law of substitute of goods, where if goods A and goods B are substitutes, a decrease in demand of goods A will result to an increase in demand for goods B. Similarly, taking into consideration the stock market and digital currency market are both substitutes as the, typo there, as they offer similar services in the financial market, the economic law of substitutes will equally apply. Now those words assembled in that way mean absolutely nothing, but they could sound smart and hilariously on this page of this PDF brochure, they have that trading strategy and then underneath it with no explanation for why, they've got a whole bunch of pictures of stock charts that happen to have gone up over some period of time.

32:03It's just completely ludicrous. That type of text and the stocks going up probably do act as a filter where people without the financial knowledge to realize that it's bullshit are prime candidates for being scammed. This PDF also includes another classic scam attribute. It promises guaranteed profit without risk. Now, of course, most investors want to earn high returns, but they're concerned about losing money. The reality in financial markets, as listeners know, is that if you want the expectation of earning higher returns, you need to be willing to take more risk. Diversification can certainly mitigate the risk of total loss like you get with an index fund.

32:39Unlikely for a total market index fund to go to zero, but even the broadly diversified equity index fund can go through double-digit percentage point drops pretty regularly, and it may take years to recover, although that hasn't been the recent experience, but historically there have been many drawdowns that lasted for a very long time. That's just the reality of investing in risky assets, but humans find losses painful. We've talked about many of these in the podcast. There are lots of overpriced and otherwise suboptimal financial products that prey on this concern by promising investors downside protection.

33:10In this case, the advisor is offering a guaranteed monthly profit, listen to this, between 5 % and 10 % depending on the amount of investment capital and whether you choose a passive or aggressive investment approach. Can you imagine? I know. Let's take a moment with that information. If we take the lower end, 5 % per month, so that must be for the passive approach, not the aggressive one. I don't know. That's an annual return of 80%, which is pretty good for context on how good that is. The most successful hedge fund in history, or at least one of them, one of the most publicly known ones, the Renaissance Technologies Medallion Fund, which has been closed, by the way, to outside investors since 1993, has annualized historical returns around 66 % before fees and 40 % after fees, at least as of when Greg Zuckerman, who we've had in this podcast, wrote his book, The History of That Fund and His Performance.

34:02Now, I would say that it is implausible that Daisy on YouTube, who's the name of the commenter that wrote the comment we were talking about earlier, has just happened to find something better than the Renaissance Technologies Medallion Fund and is excited to tell you about it in a YouTube comment. Actually guaranteed returns, properly guaranteed, at least in nominal terms, available through guaranteed investment certificates in Canada or certificates of deposit in the US are way lower. Canadian banks, GIC rates, depending on how long you're locking in for, are in the 3 % to 4 % range. Last time I checked, they're not 80%.

34:35Other than the guaranteed 80 % returns. The other big red flag with this one is the claim that there's no downside risk. So they're guaranteeing the 5%. But the PDF also says that the broker has an alternative insurance that covers for any losses incurred while trading for a client. Wow, that's impressive. Should the profit realized in a month fall below the agreed percentage, this insurance will also make up the deficit. Now that of course is not a real thing. And people fall for this. Amazing. They must. The PDF finishes with a list of benefits of working with this advisor that remind me of the scene from Step Brothers where they pitch prestige worldwide.

35:13You know what I'm talking about? It's been a long time. It's ridiculous. They say all these loosely related financial and business terms. This document finishes with something similar where it's like retirement, mortgages, crowdfunding, investment advising, tax avoidance, college funds. It's just hilarious. For the record real quick, tax avoidance is not something a credible financial planner is going to offer to anyone. Tax minimization stems from good financial tax planning, but tax avoidance is inconsistent with the overall spirit of the law. Just another little red flag there. So I was of course interested in signing up for these 80 % returns.

35:46So I asked for the next step after getting that PDF. I was sent another PDF requesting a huge amount of personal information and I was told to sign up for three different trading platforms. Two of them were actual trading platforms. One was a crypto platform, one was a stock trading platform. And one of them was an extremely sketchy, presumably fraudulent trading platform. Now it was explained to me that how this works is that the advisor would be copy trading my accounts. Now the next step would have been for me to open these accounts, add money to them, but I didn't actually go to that step because I didn't actually want to get scammed.

36:21So what do you mean by copy trading? They're trading in their accounts and then my accounts are set up in a way that copies the trades that they're making. But they've got trading authority on your account. I didn't dig into that. She was posing as a woman. They told me that they wouldn't have control of my accounts, but they would be copy trading. I didn't get this far to see how the mechanics would actually work. What would have happened, I think, based on my knowledge of scams, is that the fraudulent account, the sketchy platform that they told me to sign up for, would have likely accrued large profits, the appearance of large profits.

36:58And I would have been asked to add more money to that account, likely with a promise of doing so would increase my returns. And then that would continue until I wanted to withdraw funds, at which point you realize that you've been scammed. And then at that point, it's too late. So that's the pig butchering scam. They build trust, convince you that you're earning large profits, get you to add more funds, and then take you to slaughter. I don't know. What do you think so far? It's all crazy. It's amazing to me that people fall for this. It's amazing that you could actually set up an account on a legitimate platform and it doesn't get caught somehow.

37:31That's amazing to me. You mean that you can set it up on YouTube? No, no. That you could set up a legitimate account on some sort of trading platform and someone else is doing copy trades on that account in your name. You need to find out what the mechanics are because there's certain know your client regulations that we all have to follow. I don't know if they would have actually done anything in the legitimate accounts. Maybe all the fraudulent activity would have happened in the sketchy account. Exactly. In the other account. I didn't get that far. Maybe someone with expertise in scams can tell us what would have happened next.

38:00But it's so interesting that there's people out there that could fall for this under your likeness because if you're a regular listener or follower of your material, you would know that it's not possible. Obviously, there's enough brand credibility around you. You're right. All it takes is one. One person falls for it for enough money. It's all worthwhile. Just keep hunting for that person's going to put in a million bucks or whatever amount of money, it's still mind boggling to me. And that's my earlier comment about, I go to so much now with this assumption that it's a fake. It's so hard to tell now what's real and what's fake.

38:35It's brutal. Scams are unfortunately part of life. They've been around forever and they're not going anywhere. And as I mentioned earlier, it seems to be next to impossible to stop them. One of the best defenses against scams, as we mentioned earlier, is knowledge of scams. If If you know what the scammers are trying to do, you'll be able to avoid getting sucked into their traps. Now, unfortunately, the people who most need to hear this information will probably never listen to this episode. To address this, one of the relatively recent regulatory innovations in Canada designed in part to stop scams is the trusted contact person or TCP.

39:07Right now in Canada, licensed portfolio managers and investment advisors are required to ask. It's not a requirement for the client to have one, but you're required to ask the client to name a trusted contact person. And that is a person that the client authorizes to be contacted if their advisor is concerned that the client is being financially exploited among a few other reasons, like if they're unable to contact them for some other reason. So the trusted contact person, they don't have authority to trade in your accounts or give any orders or anything like that, but they're a third party that you, the client trust that the advisor can contact if they have concerns.

39:40So I would say that if a listener or a close family member of a listener or a client of If PWL is working with an advisor, which obviously a client would be, and does not have a trusted contact person, we likely would have asked you if you would like to have one. If you don't have one, I think it's definitely worth having just as a safeguard for stuff like this. For elderly clients, and we talked about this with Rob Carrick about how they're being often underserved by the financial industry, just with the complexity of being able to actually contact someone. I think particularly in that case, having a trusted contact person is a really nice additional layer of protection.

40:14I agree. That's it on scams. Be aware and be skeptical. Be skeptical. Talking to the scammers on WhatsApp, talking to the scammers by email, it's brutal. It's awful.

40:29All right. You wanted to talk about financial planning hot takes. There was a topic created in the Rational Reminder community that took off, at least by Rational Reminder community standards. It's got 161 comments as of earlier today, and it's probably a lot higher now, in three days since it was posted. The original post was from Tala in the community and they asked the community, what are your high conviction thoughts in finance slash financial planning that go against convention? I'll read some of the earlier comments in this thread that had a lot of engagement, like a lot of likes and other reactions.

41:02I do apologize if there are any banger comments later on in the thread that I didn't get to. I don't know how far I read down, maybe halfway down. Here we go. Cherno Kicks, who's one of our wonderful moderators in the community, said, this is his hot take, one should be more active in their bond portfolio when they reach retirement and reject modern portfolio theory for something more akin to liability-driven investment. I think that's pretty good. I wouldn't disagree. We talked to Peter Mladina about that pretty extensively. John Cochran and Robert Merton would probably agree. It doesn't mean it's always practically feasible, but I think as a concept.

41:38It makes a lot of sense. Liberté45 said, if we agree that the goal of a government is to do things for the collective better than each individual could do on their own, it's reasonable to expect governments to care for retirees properly. They said, I don't think financial planning should have this much market share. I don't think it should have three pillars, or should I say, I think the average person shouldn't need the third pillar, which is personal savings, to retire. Government programs should cover 70 % to 80 % of wages with appropriate contributions, of course, and not their current levels.

42:10If I could resume in a sentence, I think they mean if I could reduce this to a sentence, I don't think the average worker should be able to understand Ben in order to retire in safety and dignity. It's pretty good. That's a powerful comment. And Canada is unique like that. I remember the first time that I talked to people from Germany who had come to Canada, they were a little bit perplexed at our system. People in Germany don't worry about this stuff as much. I don't know the details, but I guess their government pension scheme is more robust. Maybe a German person will correct me. Or maybe the people that I met from Germany, I don't know, weren't typical, but I just thought that was interesting that they were like, yeah, this is not something people talk about that much in Germany.

42:48Having said that, a lot of people from Canada might give the same impression if they went to Germany and started talking to people, but they might not know much about investing either. Anyway, Asterix Legault said, they have a few different hot takes here. Don't have more than one third of your portfolio in one country. This is obvious to me to avoid concentrating risk in one set of institutions, one currency, one leader, et cetera. His convention is catching up though with US underperformance. He's obviously saying having more than a third of your portfolio in the US might not make sense. Next one is emerging markets should have higher expected returns because of higher risk.

43:21That's not borne out by data. Asterix Legault is convinced that it must be true. Insurance, this is also Asterix Legault, you should have as little as possible. only the most catastrophic risks should be insured. I would say for someone who's younger and working and not financially independent, well, disability and life, those are pretty catastrophic. If you have a portfolio of 100K plus and you're relatively young, any risk under 100K does not need to be insured. I mean, like vehicle insurance, you have to have. House insurance is probably more than 100K most of the time. Life and disability, unless you're financially independent or not planning to earn money anymore are probably more than that.

43:58I don't know what he's talking about then. But like waiving liability on your car or keeping liability, but waiving the collision on your car perhaps, write the car off. But if you end up causing serious injury to somebody else. Or warranties on stuff that you purchase. Wherever you're buying your toaster when you get offered. Yeah. That's probably good advice in general. Pastor Sligo also has his obligatory SUVs and pickup trucks are a scourge that needs to be eradicated. That's a hot take. So a lot of people would not agree with that. But it's an ongoing theme from Asterix Legault in the Rational Reminder community saying that SUVs are just this symbol of overconsumption.

44:36DefPatek's hot take was, Discipline saving is 10 times more important than investment costs, which are 10 times more important than returns. Interesting one. NetNETT said, Five different hot takes. People would rather appear loudly rich than quietly wealthy. It's pretty good. They said, I used to think people with nice cars or trucks were wealthy. Now I just think they're indebted up to their eyeballs and stuck with a depreciating asset that no longer satiates their hedonistic tendencies. Homeowners have no idea how much owning a house costs. Absolutely. Yeah, I agree with that one. All they see is the purchase figure and sold figure.

45:12No other costs are assessed, tracked, or calculated. That's pretty good. Investing should be boring. These are great. These aren't hot takes. Credit cards are great for points slash incentives if you pay the credit card off regularly and do not incur interest charges. Agree. AJLKMNJ says, a hot take that alienates everyone. Broad participation in index funds for the general public with voting shares is a safer way for workers to own the means of production than many proposed forms of socialism. It's interesting. I guess you have to be able to accumulate shares in index funds. True. And index funds don't let you control the votes, I don't think.

45:49Although I think Vanguard piloted something or is piloting something that lets the unit holders vote. Robert T., who's always insightful in the rational-minded community says a few things here. They're all good though. Start with determining how much you need and when you need it, and then align savings and portfolio choice to those needs. Most people, including on this forum in the rational-minded community, don't seem to do this. They just start with fund the selection. Likely true. And I agree. That's how much of this industry is predicated. 100%. all kinds of products. When you and I go to conferences, it's all about the product providers.

46:22Start with a product. The margins in the product. Well, that's the thing with conferences is they're funded by the product providers because like you said, the margins in the product. This is still Robert T. Supersizing your lifestyle, including house cars, can undersize your savings. A quarter of physicians in their 60s have a net worth less than$1 million. 11 % to 12 % have a net worth less than$500 ,000. Person down the street pays$129 ,000 in property taxes per year just to live in their supersized home. Avoid the urge to keep up with the Jones. He has got links in his post to data supporting those claims.

46:56The largest tail of risk in your portfolio is non-market risk, severe health conditions slash accidents, et cetera, and associated medical expenses in the US or divorce. It's another really interesting one. The largest tail of risk in your portfolio is non-market risk. When an investment is labeled dead, it usually is not. Equities, international value, bonds, we've talked about that before. Patience is the ultimate alpha. Patience is hard, endless tinkering, and fund flip-flopping is easy. Savings and tax management are underappreciated determinants of overall portfolio size. More effort seems to be spent on fund selection, but spending time on improving skills slash earnings and savings rather than tinkering with fund selection has a higher return on time spent.

47:39Tax management, including optimizing use of tax-advantaged accounts and investment options, can significantly reduce tax costs. Tax efficiency in taxable accounts usually means inactivity. I like that. Love this last one. This is the last one we'll read. Complexity does not equal sophistication. Hear, hear. Right? Wall Street tries to sell complexity as sophistication. Who wants to be unsophisticated, just like who wants dumb beta. There is a tendency for people as they age with all their worldly lived experience to simplify as the ultimate sophistication. There is some wisdom in that. I agree with that.

48:14Totally. Nice. Great list. Cool topic. Like I said, it was at 161 replies last time I looked. I would guess that it has increased pretty significantly since then. And if people want to check it out, of course, it's at community.rationalreminder.ca. You do have to apply. The mod team is pretty good about getting approvals done fairly quickly, but I think there's just under 12 ,000 people in there now. I occasionally read LinkedIn, Twitter, Personal Finance Canada on Reddit, but the discussions that happen in the Rational Minor community, there's nothing else like that on the internet that exists in the world.

48:48And I'm comfortable saying that, which is crazy to say. You and I are going on the road to meet some people. We're going to try to do it in August, but the dates didn't work out. But we'll be in Vancouver on the, it's around the 15th to the 17th of September and probably on the island as well in Victoria. So if you're in one of those areas, drop us a note. We're easy to find. We'll let you know what sort of thing we're going to be setting up. Probably be a rational minor meetup of some sort. And then if you're an advisor in one of those cities and you want to kind of meet one-on-one, let us know.

49:18And we could certainly organize that because we are looking to get people on our team from different centers across the country. So after that, I think you and I will be hitting the road more often to different cities, which would be super fun. Yeah, it will be super fun. Since I've been putting out those LinkedIn notes, I'm hearing from so many people. And it's interesting how many people, I guess the term is lurkers, that follow us, listen to podcasts that say, well, I finally decided to reach out because of whatever the situation might be. I would also say that particularly for this topic where you're saying to people, hey, reach out if you want to talk about joining PWL.

49:51Of course, they're going to be anonymous and quiet about it because it's an employment issue. They'd be potentially leaving an existing employer to come to PWL. I've talked to a lot of people who I would not have guessed have been reading your LinkedIn posts who have reached out to me to talk based on your LinkedIn posts. It's a very interesting little dynamic there where you're striking some kind of nerve where people are reading what you're posting and they're interested and they want to talk, but they're understandably very quiet about it. So reach out and hopefully we'll see you in beautiful BC, back to your home part of the country.

50:27My home part of the country. It's not formalized yet. Do you remember years ago I did that hike in Newfoundland? Yep. I might go and do that again in August. Wow. Same friend. Same hike? I don't know if we'll go on the same route, but the same guy that I went with last time might recreate it. We still talk about it however many years later, so we figured it might be time to do it again. We were down touring the Thousand Islands area on the border between Ontario and United States side. Boy, it's beautiful. I haven't been down there in a long time. Nice. But to be in the area on a July 4th long weekend to see the cottages and the boats and the people, it's spectacular.

51:02Beautiful area. So that was super fun. All right. Well, we'll see you in a couple of days at Montebello. Yeah. We've got an employee summit for all of PWL and some of OneDigital. It's going to be quite an experience. Quite the event. The last time we did this, we were a lot smaller than we are now. I was going to say, I don't think we've done something this scale, which is true because we haven't had this many people. Haven't been this scale. Yeah. It'll be amazing. Yeah, it will be. All right. Anything else on your mind this week? No, I think that's good. I hope we have stopped at least one person from getting scammed.

51:35For sure. Okay. As always, everybody, thanks for listening. Great topic. All right. Thanks for listening.

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