By Kelly May KY Dept. of Financial Institutions Disclaimer The views expressed in this presentation are solely the presenter’s and are not binding upon any state agency. This presentation does not necessarily reflect the views of the Department of Financial Institutions or any official within the Executive Branch. Why Invest? Invest in Knowledge Employees today often must provide for their own retirement Financial markets can be complex Choice: Invest on own or hire someone to help? There are now more choices to make in investing Protect yourself from fraud How Do YOU Look at It?
Source: The Truth About Money 4th Edition by Ric Edelman xxx
Source: The Truth About Money 4th Edition by Ric Edelman Compound Interest Would you rather have $1 million OR the sum of a penny doubled every day for 30 days? What Are Investments? Types of Investments Money Market Accounts Bonds Stocks Mutual Funds Retirement Investments Variable Annuities Crowdfunding Options Futures Money Market Accounts Short-term, high-quality loans Low risk, low return Provide income, no capital gains Risk factors Bonds Loan to government or company Types: Government, corporate or municipal bonds Moderate risk, moderate return Provide mainly income, some capital gain Risk factors
Also: savings bonds and treasury securities Stocks Shares of ownership in a company High risk, high return Mainly capital gains, some income Risk factors Mutual Funds Ownership in an investment pool Types: Stock funds, bond funds, balanced funds Moderate-to-high risk and return Income and/or capital Factors to consider
Retirement Investments Types: 401(k), 403(b), traditional IRA, Roth IRA Risk/return varies based on investments Age requirements Withdrawal can be made penalty-free at age 59 ½, BUT there are exceptions Ask your investment professional or check with the account holder to find out specifics for your account Risk factors
Variable Annuities Insurance contract Risk and return varies by product Factors to consider Fees and penalties Variable is only ONE type of annuity, but it is the only one considered a “security” in Kentucky
Indexed Annuities Are both considered insurance products Fixed Annuities Regulated by KY Dept. of Insurance Crowdfunding Online money-raising strategy for small business/start-ups Types: Donations – no expectation of gain/return Investment – expectation of return (security) High risk; return may vary Provide mainly income, possibly capital gains Risk factors Other Investments Regulated by DFI: Structured Products Exchange Traded Funds (ETFs) and Leveraged ETFs Promissory Notes Not regulated by DFI: Options Futures Other Considerations Operating history (at least 3- to 5-year track record) Performance tracking Taxes
Should I Get Help? Getting Help Investment professionals: Broker-dealer agent Registered investment adviser Financial planner Other professionals So what’s the difference? Broker-Dealer Agent Makes trade or transaction on behalf of customer Work on commission Two types: Full-service – fees range from 1.5-3% Discount – paid salary or salary + commission Must be licensed by DFI
Online brokers generally charge a flat transaction cost rather than commission Investment Adviser Rep. Provides advice about securities Usually paid through fees – around 1.5-2.5% Must be licensed by DFI IAs owe a greater legal duty to look out for their client’s best interest than BDs
Fiduciary Duty Financial Planner Providers who develop and may implement comprehensive financial plans based on long-term goals Three types: Fee-only – charge hourly or “flat” rate, no commissions Fee/commission – may charge either Commission – no fee, only product commissions Certified Financial Planner = met specific requirements May also be an IA or BD – if giving investment advice, should licensed by DFI
Other Professionals Others include: Certified fund specialist Insurance agent Certified public accountant May also be an IA or BD – if giving investment advice, should licensed by DFI Be wary of some professional designations Check it out at http://apps.finra.org/DataDirectory/ 1/prodesignations.aspx
Choosing a Professional Interview candidates Meet in person Evaluate qualifications Determine how he/she will be paid Conduct background checks Check license and complaint history with DFI And/or check with FINRA or the SEC Ask for references
Account Choices Type of account (investment adviser) Discretionary – adviser can make transactions without prior notification or approval Non-discretionary – you remain in control More Account Choices Payment for purchase Pay full cost within 3 days of purchase order Finance with money borrowed from the firm (margin account) Settling disputes Arbitration – Mandatory for BDs; Cannot be mandatory for IAs Litigation - IAs Mediation - IAs Make sure you understand what you’re signing
How Do I Invest? (With or Without Help!) Five Keys to Success 1. Pay yourself first (make investing a habit) 2. Set exciting goals 3. Don’t take unnecessary risks 4. Keep time on your side (time value of money) 5. Diversify
1. Pay Yourself First 2. Goals What are your specific goals? Is this your goal?
3. Risks Higher return = High risk Low risk = Lower return NO EXCEPTIONS! Diversify Strive for balance between risk and return What is YOUR risk tolerance? Inflation Risk Inflation is a risk you should take into account
Source: The Truth About Money 4th Edition by Ric Edelman 4. Time
NOTE: Assumes a 9% fixed rate of return, compounded monthly. All interest is left in the account to be compounded. Time Horizon Is your emergency fund in place? Recommended: 3 to 6 months of living expenses Do you need income or appreciation? When do you need your money? (Time horizon) 5. Diversify *
Source: “Five Keys to Investing Success,” Investor Protection Trust and the editors of Kiplinger’s Personal Finance magazine. *DISCLAIMER: This is only an example. Your investment professional can help determine the best suitability for you. Reallocation Over time your asset allocation will change with the performance of the market. Adjust with periodic reallocation. Example: *
Source: The Truth About Money 4th Edition by Ric Edelman
*DISCLAIMER: This example is hypothetical only and not intended to serve as an actual allocation model. Be an Active Investor Don’t just take the recommendation of others Ask questions Research the investment Know what you’re paying – costs and compensation Keep accurate track of your account Review statements and confirmations Require explanations Save Records Stay alert to investment fraud’s warning signs INVESTigate Investigate before you invest! Resources: Financial publications Broker/adviser reports or recommendations Internet (but validate the source) Company annual reports and prospectus Securities regulator Contact DFI to check out the investment and the person selling it – 800-223-2579
Check It Out KY Department of Financial Institutions (DFI): http://kfi.ky.gov 800-223-2579 Other investing resources: FINRA BrokerCheck www.finra.org/brokercheck SEC Investment adviser www.adviserinfo.sec.gov KY Dept. of Insurance http://insurance.ky.gov SEC’s EDGAR Database www.sec.gov/edgar.shtml Fraud prevention tips: http://kfi.ky.gov/public/Pages/invest.aspx www.nasaa.org
Questions? Kelly May KY Dept. of Financial Institutions http://kfi.ky.gov 502-573-3390 x252 800-223-2579 x252 [email protected]
Kelly May Kentucky Department of Financial Institutions
Department of Financial Institutions – state regulator . License/Register . Examine . Investigate Complaints /Fraud . Provide Outreach Securities Division regulates investment advisers, brokers, issuers, offerings, etc. Securities fraud takes many forms: . Fraudulent product/offering . Unsuitable investments for investor . Unlicensed adviser/broker . Unregistered product . Theft/misappropriation of funds Investment fraud is increasing: . More than 7.3 million older Americans have been victimized by a financial swindle . That’s 1 in 5 citizens over age 65!
Are more financially literate Are more likely to listen to sales pitches Are more likely to rely on their own experience and knowledge when making investment decisions Dramatically under-report fraud If an investment is unsuitable, it might mean: . Bad information on risks and benefits . A bad product for your situation
Your investment adviser (or broker) has an obligation under state law to make sure your investments are “suitable” for you Promise of a fee meal along with “high returns and little or no risk” In many cases it turns out to be the opposite Sometimes the goal is to obtain contact information for later Variable annuities – product often promoted Promoter/Scam Artist
Investors
New Investors Oil and gas deals are complicated investments Often promoted through “boiler rooms” or over the Internet Highly risky and often not appropriate for some investors
Internet Scams/Social Networking Scams Unlicensed Individuals Unregistered Products Abusive Sales Practices Fraudulent Products
High return – no risk! Profit guaranteed! For YOU only Today only (“limited time”) Make the check out to me (or “cash only”) I’ll get you the paperwork later Trust Me!
Relies on trust Con artists become part of a group (religious, ethnic, cultural, professional) Once they are accepted members, then they sell their securities (scam) Or they may sell to the group leader, and convince the group leader to help persuade the others to join in If friends/family are victim, they may recommend a false product to you 1. End calls . Register on Do Not Call List www.donotcall.gov or 888-382-1222 . Be skeptical of unsolicited calls and emails 2. Just say NO . Have a refusal script/plan to get off the phone . Have a “buddy” to help get out of high-pressure situations 3. Cool off . Take your time/wait before buying . Don’t trust testimonials & beware of investment “hot tips” 4. Check it out . Do your homework before signing any contract . Get it in writing & read the fine print . Check out the source & check references . Provide complete and accurate information . Know your right to cancel As retirement approaches, plan ahead Invest wisely Get help if you need it … you’re not alone! Contact the DFI Securities Division . 800-223-2579 . 502-573-3390 . http://kfi.ky.gov/public/Pages/invest.aspx Other contacts: . FINRA BrokerCheck www.finra.org/brokercheck . SEC Investment Adviser www.adviserinfo.sec.gov . KY Dept. of Insurance http://insurance.ky.gov . SEC’s EDGAR Database www.sec.gov/edgar.shtml
Kelly May KY Dept. of Financial Institutions http://kfi.ky.gov 502-573-3390 x252 800-223-2579 x252 [email protected]
STOPPING CYBERCRIME
A presentation by the Financial Cybercrime Task Force of Kentucky KY Dept. of Financial Institutions DISCLAIMER
The views expressed in this presentation are solely the presenter’s and are not binding upon any state agency. This presentation does not necessarily reflect the views of the Department of Financial Institutions or any official within the Executive Branch. TASK FORCE ROLE
The Financial Cybercrime Task Force of Kentucky: DFI internal work group Offers guidance and warnings for the Kentucky financial services industry Goal: Identify and address emerging threats in cybercrime and security and protect the integrity of the Kentucky financial system HARDWARE AND SOFTWARE
Virus/malware protection Update software and install patches All software – not just virus protection Password protect home networks Never auto-fill or “remember” passwords
CLICKING, SHARING, SAVING …
Never give out personal information over telephone, fax, email, social media Beware of emails and attachments If unsolicited, don’t open it If from a friend, still be cautious Back up your files Be wary online
EMAILS AND MASQUERADES
Phishing - the attempt to obtain sensitive information (password, account info, etc.) by pretending to be a trustworthy entity Spoofing - someone masquerading as another using false data (forged email sender address, false Caller ID display, etc.) Spear Phishing – (phishing + spoofing) email that appears to be from an individual or business that you know and attempts to get your personal information EMAILS AND MASQUERADES
Check before clicking … If still unsure, ask before acting
From: Smith, Bob [mailto:[email protected]] Sent: Tuesday, October 18, 2016 10:18 AM Subject: You have a new encrypted message from "Bob Smith"
This message was sent securely via an encrypted connection using SecureServer.
You have a Secure Mail message from [email protected] waiting to be read. The message willhttp://badthingshappen.com/ expire in 30 days. Ctrl+Click to follow link Access Secure Email
Note: You've received an encrypted message from [email protected] To view your message mailto:[email protected] Save and open the attachment (message.html), and follow the instructions. Ctrl+Click to follow link Sign in using your email information: d ------This message was secured by SecureServer encrypt.
Thanks! Bob Smith President The Company You Know and Trust EMAILS AND MASQUERADES
Check before clicking … If still unsure, ask before acting
IfFrom: still Smith, unsure, Bob [mailto:[email protected] ask before acting] Sent: Tuesday, October 18, 2016 10:18 AM Subject: You have a new encrypted message from "Bob Smith"
This message was sent securely via an encryptedmailto:[email protected] connection using SecureServer . Ctrl+Click to follow link You have a Secure Mail message from [email protected] waiting to be read. The message will expire in 30 days.
Access Secure Email
Note: You've received an encrypted message from [email protected] To view your message Save and open the attachment (message.html), and follow the instructions. Sign in using your email information: d ------This message was secured by SecureServer encrypt.
Thanks! Bob Smith President The Company You Know and Trust PASSWORDS
Require a password Make it unique Don’t use manufacturer default or temporary passwords Don’t use the same password for all accounts Keep it confidential Change passwords Every so often just for security Immediately if breach/disclosure Choose 2-factor authentication POOR PASSWORDS AND PINS
Passwords should NOT: Repeat letters or numbers or use sequences or patterns Use whole words or common phrases Name a specific person, place, thing, date, etc.
PINs should NOT: Be a number easily identifiable with the user THE WORST PASSWORDS
Rank Password Rank Password 1 123456 14 abc123 2 password 15 111111 3 12345 16 mustang 4 12345678 17 access 5 qwerty 18 shadow 6 123456789 19 master 7 1234 20 michael 8 baseball 21 superman 9 dragon 22 696969 10 football 23 123123 11 1234567 24 batman 12 monkey 25 trustno1 13 letmein STRONG PASSWORDS
DO Create Passwords that: Are 8 or more characters Contain uppercase and lowercase letters Contain a number Contain a special character Are unpredictable
Example of a Strong Password: Prot3ctYfc! = Protect Yourself From Cybercrime! CREATE-A-PASSWORD THINGS PASSWORDS PROTECT
Home Screen (whole machine) Other? Email
Dropbox/ Files & File Share Photos
Your
Bank Device Facebook Account
PayPal Twitter
Other Social Instagram Media? BANKING AND SHOPPING
Only give info over encrypted websites Your bank will never ask for your personal information by email or phone Look for “https” in the web address Use a designated card for online shopping Review transactions regularly for unusual activity Check out businesses before buying SKIMMERS
Avoid false readers: Pull/gently tug on card reader Check the keypad for a false overlay Check for scratches, tape or glue around the card slot Card reader should not scrape the card Avoid cameras: Cover the keypad with a hand while typing in the PIN SKIMMERS
Be cautious: Use gas pumps closer to the store or pay inside/choose ATMs that are less remote If you suspect tampering, avoid that reader and notify the business and local law enforcement immediately Double check: Review your statements closely and often for any unusual activity Report it immediately if it occurs (bank or card company as well as local law enforcement) Review your free credit report: www.annualcreditreport.com CELL PHONE PROTECTIONS
A smartphone is a computer too! Protect it like one. Auto lock and password protect Install updates Know your Wi-Fi Turn off Bluetooth when not using it Be wary of public Wi-Fi connections Understanding apps They collect (and sometimes share) information Update when available Some apps come with malware OTHER TIPS
Avoid GPS and cell phone labels/identifiers You probably don’t need RFID protectors
You might want to think about key fobs
QUESTIONS OR REPORTS
Report cybercrime to the Internet Crime Complaint Center (IC3) at http://www.ic3.gov/default.aspx. For more information on this topic, visit these sites: http://www.onguardonline.gov/ topics/secure-your-computer https://www.dhs.gov/ stopthinkconnect http://kfi.ky.gov/industry/Pages/ cybercrime.aspx