By now the entire investing world knows about the huge fraud perpetuated by Bernard Madoff. (Don't miss "Bernard Madoff: What You Need to Know") While no one can excuse his actions, there were many warnings signs that investors ignored.Simply put, when it comes to selecting an investment manager or any investment vehicle, you need to be a truly informed consumer. This is true whether you're putting your money into a hedge fund, mutual fund or a separately managed account. I wrote a letter to all of my investors that explained how LakeView Asset Management (my firm) has built-in safeguards to prevent a Madoff-like fraud. So what are a few things that, as an investor, you should look out for and ask before you select an investment advisor? Here are five key questions.
Furthermore, the investment advisor should not have the power to dispense funds from a client account other than for the payment of contractual fees. Also, the advisor should not have any other powers other than that to transact securities.
At the end of the day, it's your money. Make sure you invest in a vehicle that allows for timely and unrestricted liquidation.