If it sounds too good to be true, it probably is.
By Dalia Rodriguez, AFC®, PFPS
When considering financial products, it’s essential to research and carefully consider any financial product before investing your money to make an informed decision.
How can you tell if a financial product is too good to be true?
There are a few signs that can help you identify a financial product that may not be good for you.
Look for red flags:
These could be warning signs that something is not quite right, and it’s essential to address them before they become bigger issues:
- The product promises exceptionally high returns with little to no risk. If the advertised returns seem too good to be true, it’s best to proceed cautiously. Any legitimate investment carries some degree of risk, and there’s no such thing as a guaranteed return with no chance of loss.
- If the fees associated with the product are high or the terms and conditions are unclear or seem too complicated, it’s best to avoid it altogether.
- Be wary of companies with high-pressure sales tactics, poor reputations, or a history of fraud. If anything seems unclear or suspicious, it’s best to ask questions and seek advice from a trusted source.
Check the legitimacy of a financial product:
Here are a few things you can do to protect yourself from scams and fraudulent activity:
- Check the company’s registration: You can verify if the company offering the financial product is registered with the relevant regulatory body. You can check with the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).
- Research the company online: Look up the company online and read reviews and comments from other customers. This will give you a good idea of the company’s reputation and whether other customers have had positive experiences with their products.
- Contact the company directly: Contact its customer service department and ask questions about its products. Legitimate companies will be happy to answer your questions and provide you with the information you need.
Get Reviews from Credible Sources for financial products
Some of the most popular credible sources to review financial products include:
- Consumer Reports: This non-profit organization provides unbiased reviews and ratings of various financial products and services.
- Bankrate: This website offers reviews and comparisons of credit cards, checking and savings accounts, loans, and more.
- NerdWallet: This website provides expert reviews and ratings of credit cards, loans, insurance, and other financial products.
- Investopedia: This website offers detailed information on various financial products and services, reviews, and comparisons.
- The Balance: This website provides reviews and comparisons of credit cards, loans, and other financial products, as well as educational resources on personal finance.
- Consumer Financial Protection Bureau: This government agency’s mission is to ensure that consumers have access to fair and transparent financial products and services and to prevent abusive and deceptive practices by financial institutions.
Remember, it’s better to be safe than sorry about your finances. Always read the fine print and ask questions if anything seems unclear or suspicious. It’s always a good idea to research and compare different sources to ensure you’re getting a comprehensive view of the financial product you’re interested in.