Who could be better than your best friend's husband to be your financial adviser? It could be the biggest mistake of your life.
Carrie Brown of Memphis, Tenn., knows from experience. Carrie's lifelong friend, Tina Caronna, was married to Joe Caronna, a guy with a head for numbers and a gift of gab that led Joe and Tina's family and friends like Carrie to buy insurance and annuities from him. They figured Joe would do right by them. The Caronnas were moving up in the world, buying a bigger house and amassing a fantastic collection of sports cars.
There was a big problem: Joe's increasingly deeper pockets were being lined with his clients' money, in some cases, their life savings. In 2013, he was sentenced to 85 months in federal prison for stealing nearly $700,000 from 18 clients. He is also serving a life sentence for the murder of his wife, Tina. How his crimes are intertwined will be revealed in the season premiere of "American Greed," 9 p.m. Wednesday on CNBC.
Suze Orman Offers Advice on How Not to Get Ripped Off
According to CNBC's Suze Orman, the disaster that transformed Caronna's clients into victims might have been prevented if they had seen the red flags that are signs of a crooked financial adviser.
"The first thing you have to understand is be very careful when a family member or a friend says, this person is great. That's my first warning sign, believe it or not."
Orman cautions to never write a check made out directly to a financial adviser or to a firm that only has one or two offices. "You only want to write a check to a major firm or bank that has 20 or 30 other offices throughout the U.S. If your particular office goes under, you know you have many other offices you can go to."
"If you think you've been ripped off by your broker, you need to contact FINRA, CNBC personal finance correspondent Sharon Epperson said of the Financial Industry Regulatory Authority. "That is the agency that regulates brokers. Go to the investor complaint center at finra.org/complaint and file your complaint."
"It can take a while to get your money from fraudulent financial advisers or brokers," she said. How long? Six years after the Bernie Madoff scandal, 56 percent of what investors lost has been recovered, with only a handful of victims made whole again.