Financially illiterate susceptible to investment frauds

People who are financially illiterate are easily lured to pour their hard-earned money into fraudulent investment schemes.

This was the observation of Philip Vincent Tolentino, a financial adviser working for a multinational financial services company.

“Because people do not have the basic understanding of what is a ponzi scheme and how it can affect a certain business industry and the economy as we saw that happened last 2008  sa U.S. kay  Bernie Madoff.  There should be a conscious effort to extensively educate the public on these types of investments,” Tolentino said.

He added that people lacking in education and knowledge on these investment schemes are still willing to go into it and take the risk.

Earlier this month President Rodrigo Duterte ordered a crackdown on so-called investment companies which have sprouted in Davao and Soccsksargen regions.  He singled out the Kapa Community Ministry which promises 30 percent monthly profit on their investments which the ministry describes as donations.

The President ordered law enforcement agencies to probe and if warranted, shut down the Surigao del Sur-based corporation which according to him was a Ponzi scheme and a form of syndicated estafa.

For Tolentino, the promise of huge monetary rewards ranging from 200 percent to 700 percent monthly of your invested capital is seen as an instant remedy to a long-time financial illness that many people are suffering.

“Majority of the victims are ordinary Filipinos who experience hardship in life.  If you look at their point of view, “walang wala naman ako, kaya kahit ano, pasukan ko nalang basta makuha kaagad ang resulta!” (I have nothing, whatever it is I will get into it as long as I get the results quickly) said Tolentino, a financial expert with nearly two decades of experience in promoting financial literacy.

Experience as the best teacher

Tolentino advices  people who are being enticed to put money into these schemes  to become cautious and prudent.

“I usually ask around first. Look into how it works.  See who owns the company, the products and services they offer. It also helps on how long the company has existed. Sometimes I take a further step, I place a small amount and see how the mechanics of these investments work.  Sometimes the best teacher is experience,” Tolentino said.

“But again, with the conscious thought that this is something that you can share and teach others by showing how you personally experienced it. Those who will try to convince uses that process. They invest, then they will show you that this is what they enjoy.  You can counter that by also showing that you joined the scheme, and show them that this is how they pay you with, investments or new capital from new investors,” he added.

He also strongly advises to refrain from investing so much capital like taking out loans or mortgaging their properties which many people do.

Invest in legitimate investments

Tolentino advises that people should invest in legitimate investments.

“You can go to mutual fund companies, trading platforms like COL FINANCIAL, BPI Trade, First Metro, UITF (Unit Investment Trust Funds) with Banks, VUL ( Variable Universal Life) with Insurance Companies,” Tolentino said.

“Unlike these investment schemes, legitimate investments first have regulations.  They follow certain rules and guidelines from the Department of Finance, Banko Sentral ng Pilipinas, Insurance Commission and the Anti Money Laundering Council.  These regulations were created to protect the private investors from the abuse companies may do to them based on previous experiences,”

“Also legitimate investments DO NOT GUARANTEE returns since we all know that tomorrow may bring a different story with the performance of these investments. It usually gives ROI (Return of Investments) from the actual performance of the investment,” Tolentino adds.

The income from these investments are legitimate sources of profits/businesses and they have been doing businesses a long time already. Some established companies have been operating for over a century.

“Legitimate investments are always coupled with “length of time” for the investment to grow. It is like creating a farm, when you plant the seeds, it will take time to grow and harvest,” Tolentino said.

For those wanting to invest, Tolentino shared the following tips: 

People should consider their investment objective / purpose, investment risk appetite (gain and loss appetite), investment horizon (length of time to invest and when you need the money), investment capital (amount of money you are willing to put at risk to enjoy a certain return in the future)

“Do financial planning, talk to people who regularly do these types of transactions everyday. Ask around, who knows, the options we provide may meet the financial need you want to address,” Tolentino said.—Source:
Rudolph Ian Alama / pia.gov.ph

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