Watch out for scams!

Most North Carolinian’s are working hard to take care of their families and help their neighbors in the current crisis.  Nevertheless, criminals seek to exploit the Covid-19 pandemic to further their scams.

We received the notice below from the North Carolina Secretary of State warning residents to be wary, and we want to share it with you.  If you or someone you care about comes across something questionable related to investing or charitable activities, please don’t hesitate to call. We can help you check it out.  PLC Wealth is here to help you and answer any questions you have.

Take care, and thank you for your business with PLC Wealth.”

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NC Secretary of State Offers Tips to Avoid COVID-19 Related Investment Scams

NC Secretary of State Elaine Marshall is cautioning investors that the ongoing Coronavirus pandemic will likely spark a surge of investment fraud.

 

“Sadly, scam artists will seek to exploit rising concerns about COVID-19 to draw people into investment traps,” warned Marshall. “Fraudsters often use the day’s headlines in their pitches, so expect to see them prey on the fear surrounding the unfolding Coronavirus pandemic and recent economic developments to promote sham investments.”

 

The North American Securities Administrators Association (NASAA), of which the NC Secretary of State’s Office is a member, is joining state regulators in offering tips to keep investors safe in these uncertain times.

 

Bad actors may develop schemes falsely purporting to raise capital for companies manufacturing surgical masks and gowns, producing ventilators, distributing small-molecule drugs and other preventative pharmaceuticals, or manufacturing vaccines and miracle cures.

 

Scammers also will seek to take advantage of concerns with the volatility in the securities markets to promote “safe” investments with “guaranteed returns” including investments tied to gold, silver and other commodities; oil and gas; and real estate. Investors also can expect to see schemes touting quickly earned guaranteed returns targeting seniors worried about economic disruptions and losses to their retirement portfolios.

 

“From guarantees of high returns without risk to promises of a miracle cures, if it sounds too good to be true, it probably is,” warned Secretary Marshall. “I urge North Carolinians to follow these tips to help protect your financial and physical health as you navigate these uncertain times.”

 

Investors are encouraged to call the NC Investor Hotline at (800) 688-4507 or email us at before signing over money in any investment opportunity. If you suspect an investment opportunity is fraudulent, you may report it at www.sosnc.gov. You can also find a wealth of investor education material at www.sosnc.gov/divisions/securities.

 

Schemes to Watch for: 

 

Private placements and off-market securities. Scammers will take advantage of concerns with the regulated securities market to promote off-market private deals. These schemes pose a threat to retail investors because private securities transactions are not subject to review by federal or state regulators. Retail investors must continue to investigate before they invest in private offerings and independently verify the facts for themselves.

 

Gold, silver and other commodities. Scammers may also take advantage of the decline in the public securities markets by selling fraudulent investments in gold, silver and other commodities not tied to the stock market. These assets are often promoted as “safe” or “guaranteed” means of hedging against inflation and mitigating systematic risks. However, scammers may conceal hidden fees and mark-ups, and the illiquidity of the assets that may prevent retail investors from selling the assets for fair market value. There are no “can’t miss” opportunities.

 

Recovery schemes. Retail investors should be wary of buy-low sell-high recovery schemes. For example, scammers will begin promoting investments tied to oil and gas, encouraging investors to purchase working or direct interests now so they can recognize significant gains after the price of oil recovers. Scammers will also begin selling equity at a discount, promising the value of the investments will significantly increase when the markets strengthen. Never lose sight of the risks associated with any prediction of future performance and remember that market gains may not correlate with the profitability of their investments.

 

Get-rich-quick schemes. Scammers will capitalize on the increased unemployment rate with false promises of quick guaranteed returns that can be used to pay for rent, utilities or other living expenses.

 

Replacement and swap schemes. Investors should be wary of any unlicensed person encouraging them to liquidate their investments and use the proceeds to invest in more stable, more profitable products. Investors may pay considerable fees when liquidating investments, and the new products often fail to provide the promised stability or profitability. Advisors may need to be registered before promoting these transactions and legally required to disclose hidden fees, mark-ups and other costs.

 

Real estate schemes. Real estate investments may be appealing because the real estate market has been strong and low interest rates have increased demand. Scammers often promote these schemes as safe and secure, claiming real estate can be sold and the proceeds can be used to cover any losses. However, real estate investments present significant risks, and changes to the economy and the real estate market may negatively impact the performance of these products.

 

How to Protect Yourself:

 

The NC Secretary of State’s Securities Division offers this guidance to help investors avoid investment scams:

 

Ask before you invest. Investors in North Carolina should call the NC Investor Hotline at (800) 688-4507 or email us at to find out if the salesperson and the investment opportunity itself are properly registered. Investors also can check the SEC’s Investment Adviser Public Disclosure database and FINRA’s BrokerCheck. Avoid doing business with anyone who is not properly licensed. If you suspect fraud, please report it to us at www.sosnc.gov.

 

Don’t get hooked by a phishing scam. Phishing scams may be perpetrated by those claiming an association with the Centers for Disease Control and Prevention, the World Health Organization, or by individuals claiming to offer medical advice or services. Watch out for con artists offering “opportunities” in research and development. These scams may even be perpetrated by people impersonating government personnel, spoofing their email addresses and encouraging victims to click links or open malicious attachments. These emails may look real and sound good, but any unsolicited emails with attachments and web links may be directing you to dangerous websites and malicious attachments that can steal information from your computer, lock it up for ransom, or steal your identity. When in doubt, don’t click.

 

There are no miracle cures. Scientists and medical professionals have yet to discover a medical breakthrough or develop a vaccine or cure for COVID-19. Don’t fall for online pharmacies claiming to offer vaccines and don’t send money to anyone claiming they can prevent COVID-19, through a vaccine or other preventive medicine.

 

Avoid fraudulent charity schemes. White-collar criminals may pose as charities soliciting money for those affected by COVID-19. Fake charities will frequently use sound alike names that mimic established charities. Rather than clicking on the links or responding to the email addresses or phone numbers provided in a text, email or social media post, do an internet search to find the charity’s website and reach out to them directly. A link in an unsolicited email could send you to an impostor site. Give generously but wisely to make sure your help is going to those who need it.

 

Be wary of schemes tied to government assistance or economic relief. The federal government may send checks to the public as part of an economic stimulus effort. It will not, however, require the prepayment of fees, taxes on the income, the advance payment of a processing fee or any other type of charge. Anyone who demands prepayment will almost certainly steal your money. And don’t give out or verify any personal information. Government officials already have your information. No federal or state government agency will call you and ask for personal

Cryptocurrency…what’s all the buzz about?

Have you caught cryptocurrency fever, or are you at least wondering what it’s all about? Odds are, you hadn’t even heard the term until recently. Now, it seems as if everybody and their cousin are getting in on it.

 

Psychologists have assigned a term to the angst you might be feeling in the heat of the moment. It’s called “FoMO” or Fear of Missing Out. Education is the best first step toward facing FoMO and making informed financial choices that are right for you. So before you make any leaps, let’s take a closer look.

 

What is cryptocurrency?

Crytpocurrency is essentially a kind of money – or currency. Thanks to electronic security – or encryption – it exists in a presumably secure, sound and limited supply. Pair the “encryption” with the “currency,” and you’ve got a new kind of digital asset, or electronic exchange.

 

Well, sort of new. Cryptocurrency was introduced in 2009, supposedly by a fellow named Satoshi Nakamoto. His Wikipedia entry suggests he may not actually be who he says he is, but minor mysteries aside, he (or possibly “they”) is credited with designing and implementing

bitcoin as the first and most familiar cryptocurrency. Ethereum is currently its second-closest competitor, with plenty of others vying for space as well (more than 1,300 as of early December 2017), and plenty more likely to come.

 

Unlike a dollar bill or your pocket change, cryptocurrency exists strictly as computer code. You can’t touch it or feel it. You can’t flip it, heads or tails. But increasingly, holders are receiving, saving and spending their cryptocurrency in ways that emulate the things you can do with “regular” money.

 

How does cryptocurrency differ from “regular” money?

In comparing cryptocurrency to regulated fiat currency – or most countries’ legal tender – there are a few observations of note.

First, since neither fiat nor cryptocurrency are still directly connected to the value of an underlying commodity like gold or silver, both must have another way to maintain their spending power in the face of inflation.

 

For legal tender, most countries’ central banks keep their currency’s spending power relatively stable. For cryptocurrency, there is no central bank, or any other centralized repository or regulator. Its stability is essentially backed by the strength of its underlying ledger, or blockchain, where balances and transactions are verified and then publicly reported.

 

The notion of limited supply factors in as well. Obviously, if everyone had an endless supply of money, it would cease to have any value to anyone. That’s why central banks (such as the U.S. Federal Reserve, the Bank of Canada, and the Bank of England) are in charge of stabilizing the value of their nation’s legal tender, regularly seeking to limit supply without strangling demand.

 

While cryptocurrency fans offer explanations for how its supply and demand will be managed, it’s not yet known how effective the processes will be in sustaining this delicate balance, especially when exuberance- or panic-driven runs might outpace otherwise orderly procedures. (If you’re technically inclined and you’d like to take a deep dive into how the financial technology operates, here’s one source to start with.)

 

Why would anyone want to use cryptocurrency instead of legal tender?  

For anyone who may not be a big fan of government oversight, the processes are essentially driven “by and for the people” as direct peer-to-peer exchanges with no central authorities in charge. At least in theory, this is supposed to allow the currency to flow more freely, with less regulation, restriction, taxation, fee extraction, limitations and similar machinations. Moreover, cryptocurrency transactions are anonymous.

 

If the world were filled with only good, honest people, cryptocurrency and its related technologies could represent a better, more “boundary-less” system for more freely doing business with one another, with fewer of the hassles associated with international commerce.

Unfortunately, in real life, this sort of unchecked exchange can also be used for all sorts of mischief – like dodging taxes, laundering money or funding terrorism, to name a few.

 

In short, cryptocurrency, blockchain technology, and/or their next-generations could evolve into universal tools with far wider application. Indeed, such explorations already are under way. In December 2017, Vanguard announced collaborative efforts to harness blockchain technology for improved index data sharing.

 

That said, many equally promising prospects have ended up discarded in the dustbin of interesting ideas that might have been. Time will tell which of the many possibilities that might happen actually do.

 

Even if I don’t plan to use cryptocurrency, should I hold some as an investment? 

If you do jump in at this time, know you are more likely speculating than investing.

 

Bubble or not, consider these two points. First, there are a lot of risks inherent to the cryptocurrency craze. Second, cryptocurrency simply doesn’t fit into our principles of evidence-based investing … at least not yet.

 

Let’s take a look at the risks.

 

Regulatory Risks – First, there’s the very real possibility that governments may decide to pile mountains of regulatory road blocks in front of this currently free-wheeling freight train. Some countries have already banned cryptocurrency. Others may require extra reporting or onerous taxes. These and other regulations could severely impact the liquidity and value of your coinage.

 

Security Risks – There’s also the ever-present threat of being pickpocketed by cyberthieves. It’s already happened several times, with millions of dollars of value swiped into thin air. Granted, the same thing can happen to your legal tender, but there is typically far more government protection and insurance coverage in place for your regulated accounts.

 

Technological Risks – As we touched on above, a system that was working pretty well in its development days has been facing some serious scaling challenges. As demand races ahead of supply, the human, technical and electric capital required to keep everything humming along is under stress. One recent post estimated that if bitcoin technology alone continues to grow apace, by February 2020, it will suck away more electricity than the entire world uses today.

 

That’s a lot of potential buzzkill for your happily-ever-after bitcoin holdings, and one reason you might want to think twice before you pile your life’s savings into them.

 

Then again, every investment carries some risk. If there were no risk, there’d be no expected return. That’s why we also need to address what evidence-based investing looks like. It begins with how investors (versus speculators) evaluate the markets.

 

What’s a bitcoin worth? A dollar? $100? $100,000? The answer to that has been one of the most volatile bouncing balls the market has seen since tulip mania in the 1600s.

 

In his ETF.com column “Bitcoin & Its Risks,” financial author Larry Swedroe summarizes how market valuations occur. “With stocks,” he says, “we can look at valuation metrics, like earnings yield. With bonds, we can use the current yield-to-maturity. And with assets like reinsurance or lending … we have historical evidence to make the appropriate estimates.”

 

You can’t do any of these things with cryptocurrency. Swedroe explains: “There simply is no tangible relationship between any economic or financial parameters and bitcoin prices.” Instead, there are several ways buying cryptocurrency differs from investing:

 

  • Evidence-based investing calls for estimating an asset’s expected return, based on these kinds of informed fundamentals.
  • Evidence-based investing also calls for us to factor in how different asset classes interact with one another. This helps us fit each piece into a unified portfolio that we can manage according to individual goals and risk tolerances.
  • Evidence-based investing calls for a long-term, buy, hold and rebalance strategy.

 

Cryptocurrency simply doesn’t yet synch well with these parameters. It does have a price, but it can’t be effectively valued for planning purposes, especially amidst the extreme price swings we’re seeing of late.

 

What if I decide to buy some cryptocurrency anyway?

We get it. Even if it’s far more of a speculative than investment endeavor, you may still decide to give cryptocurrency a go, for fun or potential profit. If you do, here are some tips to consider:

 

  • Think of it as being on par with an entertaining trip to the casino. Nothing ventured, nothing gained – but don’t venture any more than you can readily afford to lose!
  • Use only “fun money,” outside the investments you’re managing to fund your ongoing lifestyle.
  • Educate yourself first, and try to pick a reputable platform from which to play. (CoinDesk offers a pretty good bitcoin primer.)
  • If you do strike it rich, regularly remove a good chunk of the gains off the table to invest in your managed portfolio. That way, if the bubble bursts, you won’t lose everything you’ve “won.” (Also set aside enough to pay any taxes that may be incurred.)

 

Last but not least, good luck. Whether you win or lose a little or a lot with cryptocurrency – or you choose to only watch it from afar for now – we remain available to assist with your total wealth, come what may.

 

 

What does the Equifax data breach mean for you?

Financial monitoring…this is part of financial planning that gets often overlooked.  Like a crack in the foundation of a house, it is hard to see unless you are looking for it, but it can have catastrophic consequences if left unattended.  As you may have heard, Equifax (which is one of the 3 main credit reporting agencies) admitted to a historic data breach which occurred earlier this year.  If you haven’t heard the details, you need to read about it here.  This explanation and suggested action steps from the Federal Trade Commission is excellent.  Supposedly 143 million people had their personal information potentially comprised.  I say ‘potentially’ because Equifax has not disclosed the exact details of the breach, so we really don’t know the extent of what occurred.  I find it pretty disappointing that the breach occurred earlier this year, they knew about it several weeks, if not months ago, and yet we are just now hearing about it.  That said, I wanted to take the opportunity to highlight a few different points.

What should you do?

First, do not get lax about these data breaches.  Just because they seem to happen all the time, and the numbers of people affected seem so large that it is hard to fathom as real, do not take a laissez faire approach, thinking it will never happen to you.  This is exactly the attitude these criminals look to exploit.  And make no mistake about it…the days of the disgruntled teenager hacking away in his parents basement is long past.  Most of these hacks and the subsequent identity thefts are undertaken by world wide organized crime rings.

Next, check your credit report.  Note, this is different than requesting your credit score.  By government mandate, everyone is allowed one free credit report every year.  You can go through the process here.  It only takes a few minutes.  If you are married, do this separately for both spouses.  This will give you a detailed listing of all credit accounts that are open, or were previously opened, in your name.  I suggest that you download and review this every year.  I have done this fairly consistently, and have found error accounts, or accounts that I thought were closed out but were actually still open.  Closing a credit account (like an old Gap card that you never use or the credit card you opened that one time to get a free plane ticket) may drop your credit score temporarily, but I think it is worth the short term hit so as not to have accounts open that you never use or check.  These dormant credit accounts can also be great opportunities for criminals to hack and use.

Finally, you can be your own best protection against identity theft by just being aware and diligent.  I suggest you read through the FTC’s post (link above) and review your annual credit report.  But don’t stop there…these institutional hacks open the door for more and more identity theft, the fastest growing crime in the world.  At PLC Wealth, we have several procedures in place to do our part to make sure our clients money is protected and secure.  Additionally, TD Ameritrade has even more built-in procedures to ensure money does not move to anyone other than the account owner.  But we can not protect your bank accounts or credit accounts, which seem to be where much of this white collar crime occurs.  It starts with personal information being stolen, then moves to the criminals (usually through computer programs) trying to probe to see where they can get in.  If you think your bank account has been compromised, let the bank know immediately.  They will change your account number and give you new bank cards.   If you see a strange transaction on a credit card, let the credit card company know right away.  It’s likely that you won’t be held responsible for that charge, and they will send you new cards immediately, sometimes overnight.

The main point of all of this is that you need to be diligent.  With 143 million people exposed as part of this latest breach, it is likely that some of your personal information was part of it.  I checked Equifax’s alert site here and found that both my and my wife’s information was part of the breach.  That being said, I will most likely not take part in the free credit monitoring service that Equifax is offering, primarily because the service will automatically start billing at their normal monitoring rate after the first year, unless you proactively cancel.  That just seems like a slick way to get more people paying for their services rather than being a true pro bono offering.  I will, however, be watching transactions diligently and checking my own credit report for anything that looks off…and I think you should too.