Physicians Tempted by the Exotic Attraction in Investing

By Michael J. Searcy

Not everybody can get into this club. Not everyone I work with is entitled to buy into this product. I’m allowing you entry because of your elite status, but only if you make a quick decision because I can’t hold your spot long…

It’s the point of all scams—to prey on an individual’s desire to do better than most, and physicians seem to be a top target for these exotic schemes. Call it greed, call it whatever you want, but there’s a selling sizzle promising more than one should get, faster than one should get it, and it’s as sexy as can be!

The satisfaction that comes from investing in exotic products only available to the elite drives many to imprudently supply money to a promoter and overlook the credibility of who they are working with or what’s being sold. Even if you do trust your advisor, make sure to take due diligence in researching their operations. Are they insured for the products they’re selling you? Are the exotic products, the alternatives, the hedge funds, the private placement limited partnerships, and all the specialty type products covered under their policy? And if so, to what extent? If physicians carry malpractice to protect themselves from things gone wrong, you can bet there should be the same standards in the financial industry. If not, you‘ve got to ask yourself the question: are the insurance companies missing it or are the alternative and exotic products where most of the claims come from?—A risk they are unwilling to assume!

Hot Products = Danger?

Limited Partnerships

Offshore Disability Insurance Products

Tax Sheltered Ventures

Hedge Funds

Account Receivable Factoring Entities

Leveraged Exchange Traded Funds

Life Settlement/Viatical Agreements


Unregistered Securities

…and many more…

These products may be specifically EXCLUDED on your providers E&O (think Malpractice) insurance!

Protect Yourself Is the investment waving a red flag in your face? Look out for these common red flags in determining the validity of your potential investments:

  • Promises higher than average returns
  • Promotes exclusive entry
  • Marketed as a tax shelter
  • Strokes the ego, appeals to greed
  • No system of checks and balances
  • Low level of liquidity
  • You don’t really understand the business

Remember, nobody can guarantee the success of a venture. However, a competent and qualified advisor with no vested interest should be solicited for a second opinion. Always look for an advisor who will evidence in writing that they accept fiduciary responsibility with respect to the advice provided. Even if you spend a little money for the advice, you’re making a decision with eyes wide open, because as the saying goes, “We don’t know what we don’t know!”

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.  

Published for the blog on October 5, 2015 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.