Asset Protection

By Emily Long

July 1, 2010

A recent investment scandal hasn't done much to boost the confidence of Thrift Savings Plan enrollees.* But federal employees can take a few simple steps to check the credentials of financial advisers before handing over their savings.

The Securities and Exchange Commission had been investigating Wayne McLeod, a Florida-based investment adviser whose F&S Asset Management Group had more than $43 million under management for more than 1,100 clients, most of whom were retired government employees. SEC alleges that McLeod guaranteed investors high return rates but in fact was running a Ponzi scheme, using new funds to pay himself and prior investors. McLeod was found dead last week of a self-inflicted gunshot wound.

According to SEC, McLeod recruited investors through benefits counseling and planning seminars, which he provided to government agencies for up to $15,000 per event. In addition to personalized benefit analyses, he advised participants on how to allocate their TSP dollars across funds and even made changes for those who provided their usernames and passwords.

So how can TSP investors protect their savings from fraudulent counselors? Mary Head, deputy director of SEC's Office of Investor Education and Advocacy, said the first step in protecting your assets and avoiding fraud is to get more information on the investment professional you are considering working with.

"The saying 'If it sounds good to be true, it probably is' certainly prevails in the investment world," she said. "You owe it to yourself to get some unbiased information about the investment professional and the investments being offered."

Bob Liens, a certified public accountant, and Tammy Flanagan, senior benefits director at the National Institute of Transition Planning, agreed that common sense and a couple of questions can go a long way to ensuring a financial adviser is legitimate.

"Look into the company you're handing your career savings over to and make sure you know what it is they're investing in, how long they've been in business, how many clients they've had that are similar to you, and don't put all your trust into someone you don't know other than they came and did a seminar in front of you," said Flanagan. Just because your agency hired a counselor to run a seminar doesn't mean that person is trustworthy, she added.

Liens pointed out that a good financial planner should be able to address concerns and show investors where their money is located. TSP participants shouldn't be afraid to challenge counselors and ask questions, no matter how basic, he said.

SEC points investors to several online tools that provide more information about brokers and financial planners. FINRA Broker Check is a website managed by the Financial Industry Regulatory Authority that compiles the professional backgrounds of brokers and brokerage firms. Investors can see whether or not regulators have lodged complaints with an individual or firm.

TSP participants working with investment advisers can check if those individuals are registered with SEC or with the state in which they work using the Investment Advisor Public Disclosure website.

Finally, the EDGAR database tracks if firms have registered their investments with SEC. Most companies have to register before they begin selling shares, Head said.

SEC also maintains two fact sheets with resources for investors, Getting Info About Companies and Protect Your Money.

*Clarification: The Thrift Savings Plan itself has not been accused of any mismanagement or fraud. The controversy involves only McLeod's company, not the management of the government's 401k-style plan.


By Emily Long

July 1, 2010

http://www.govexec.com/pay-benefits/pay-benefits-watch/2010/07/asset-protection/31828/