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Notebook Money

Faith, finances, and fraudsters

(Krieg Barrie)

Money

Faith, finances, and fraudsters

When hiring financial help, don’t fall for ‘the Jesus card’

If you’re a Christian, you’re also a potential target of affinity fraud—what occurs when a financial adviser uses a profession of faith in Christ to worm his way into your confidence. That’s what happened recently to high-profile pro athletes, including San Francisco Giants pitcher Jake Peavy and Denver Broncos quarterback Mark Sanchez. They and others allegedly lost more than $30 million.

Their financial adviser, according to an announcement made last month by the Securities and Exchange Commission, was Ash Narayan. He appealed to a common bond of Christian faith and then allegedly moved their money without consent to his own failing business interests. Officials have suspended Narayan’s registrations and frozen his personal assets.

Fraudulent financial schemes with a religious tie-in aren’t new. Bernie Madoff’s heavily Jewish client base wanted to do business with him and believed him to be a high-profile player in the Jewish philanthropy world. Christians have been the targets of dozens of financial scams in recent years, with perpetrators attempting to take advantage of a soft spot cultivated by supposedly shared faith distinctives. The curtailing of caution that takes place when an affinity creates excessive trust has often led to painful financial loss and heartache.

How can Christians in particular avoid such affinity fraud? Is there something unique about the tenets of the Christian faith that causes believers to be particularly susceptible to fraud? Christians are not an inherently naïve group but are often trusting and loyal. Understandably, many believers want to do business with other believers and can be prone to sacrificing normal due diligence when an exterior of common faith is present. It ought not to be this way.

You should take precautions when selecting an adviser even when the prospective adviser professes belief, attends your church, or is known to have a reputation in a faith community. “Piety is no substitute for technique”: Whether the adviser is a Christian or not, standard precautions and safety nets ought to be in place. Seven questions to ask:

  • Does that adviser take custody of your assets himself, or is custody maintained by an independent firm (like Fidelity or Charles Schwab)?
  • Does he function as a legal fiduciary, obligated to avoid self-dealing and conflicts of interest, or is he under no such obligation to put your interests first? (Believe it or not, the latter is common.)
  • Who regulates the adviser, and what does his practice’s internal compliance look like?
  • What is his personal regulatory history and discipline record?
  • What character references and credentials does he have?
  • What is his compensation system, and does it put his interests at odds with yours?
  • Does he push back when you seek to understand better the mechanics of his business?

Sadly, the biggest red flag is often how hard a professing believer plays the “Jesus card.” Shared beliefs are important, but aren’t some of the cornerstones of those beliefs transparency, humility, and goodwill? The investing public would be wise to focus on competence and character more than the marketing of a profession of faith. That represents truly biblical stewardship.

 —David L. Bahnsen is a financial adviser based in California

Comments

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  • Jampa's picture
    Jampa
    Posted: Wed, 07/13/2016 02:58 pm

    Been there, done that and lost alot of my retirement account

  • Sawgunner's picture
    Sawgunner
    Posted: Wed, 07/20/2016 11:24 am

    I think what most folks really need is a good Dave Ramsey course. As I tell people all the time, for most couples the hardest things to say after "I do" are the words "We can't"

    I hear all the huckster ads on allegedly Christian or faith friendly radio. Of course radio stations run all the disclaimers: "for entertainment purposes only" along with "we neither endorse nor verify the accuracy" of Brother Flybinite's get rich quick seminar.

    So here is financial wisdom in a nutshell. Live sacrificially. Spend less than you make. Be ready for unexpected stuff. Start with the Dave Ramsey baby steps. Research both the firm and the individual before you hand them a single cent.

    And be especially leery of any investment pitch conducted by "Pastor" XYZ who will be hosting a seminar over the weekend for which you must pay an upfront fee to attend. 

    Suckers born every minute as Phineas Trump Barnum reminded us all.

  • Sawgunner's picture
    Sawgunner
    Posted: Wed, 07/20/2016 11:27 am

    I think most of us have nothing but contempt for anyone who would use any religious affiliation to promote profit making. A young man I know was literally taken for a ride to what he thought was some type of revival/men's ministry by a man whom he had taken to be a dear friend. Instead it was an elaborate ruse to hook a new participant in some type of MLM scam.

  •  Brendan Bossard's picture
    Brendan Bossard
    Posted: Thu, 07/21/2016 11:20 pm

    Watch out for fads and ads that all but guarantee financial bliss.  (Remember when gold was going up every year?  Gold has downside potential, just like every other investment.)  Ask lots of questions.  And remember that every--spelled E-V-E-R-Y--benefit has its cost.

  • Nick Stuart's picture
    Nick Stuart
    Posted: Wed, 09/07/2016 05:57 pm

    The way to tell when the financial advisor is telling you an untruth is when his/her lips are moving.

    Ask them "If you're so smart, why aren't you rich?" Seriously, if they're that competent why are they wasting their time with you?

    Study up and do it yourself. There are a lot of good books, one I'd recommend is "A Random Walk Down Wall Street" by Burton Malkiel.