Recently, a Tarrant County Texas court sentenced William “Doc” Gallagher to three life terms, plus another 30 years, after pleading guilty to a Ponzi scheme.
Gallagher, a radio host calling himself the “Money Doctor,” mixed Christian doctrine with financial advice. In the process, he racked up $32 million in losses to his clients while targeting the elderly for exploitation. Methodically, Gallagher worked his way through churches preying on people who believed they could trust a Christian.
The con-artist paid for airtime on multiple stations in the Dallas area as he delivered homespun, Christian-based financial advice, and books such as “Jesus Christ, Money Master.” Gallagher advertised his firm on Christian radio with the tagline, “See you in church on Sunday.”
Gallagher was indicted in 2019 for preying on senior citizens, many of whom had to sell their homes, borrow money from kids or take part-time jobs to supplement Social Security benefits.
After shutting down Gallagher’s scam in 2019, the Securities and Exchange Commission said he raised between $20 million and $30 million from senior citizens, some as old as 92, between December 2014 and January 2019, relying on frequent religious references on his radio shows to establish trust with his audience of Christian investors.
Gallagher falsely claimed to be a licensed investment advisor and promoted a “Diversified Growth and Income Strategy”, in which he promised to acquire income-generating assets for clients in five specified categories. The schemer promised investors they would receive guaranteed, risk-free returns between 5% and 8% per year.
Unfortunately, Gallagher ran a Ponzi scheme, spending virtually all investor funds on himself or to make Ponzi payments to investors. To keep the scam going he produced phony account statements showing false account balances.
Over the years I have been congregation president, finance chair and church treasurer. Each of our staff is involved with different churches.
Given this, do we deserve a free pass? Absolutely not. Just because you go to church with someone does not mean they should be trusted with your money. Church is full of sinners—myself included.
Although there are many good advisors, it is helpful to ask a few questions first.
- Follow the money. Do they work on commission or are they a fee-only advisor? If paid on commission, know that different products pay different commission levels. There can be an incentive for an advisor to recommend one product over another. Request, in writing, all the ways an advisor will be compensated or benefit from managing your money.
- Are you a fiduciary? Different investment advisors have differing levels of care owed to a client. A fiduciary is legally obligated to do what is in the client’s best interest—and not just sell a product. If an advisor is not a fiduciary, determine how that will affect you.
- Get statements from a reputable firm. Crooks like William Gallagher and Bernie Madoff were able to keep their clients in the dark since they produced their own statements. This made it easy to invent brokerage statements to say what the con-men needed them to say to keep the scam going. In comparison, our clients get statements directly from Charles Schwab or TD Ameritrade. That gives clients a much better audit function.
- Nothing is “risk free.” US Treasury bonds, CD’s or stocks all have elements of risk. Everything has an element of risk. If someone tells you their investment strategy is “risk free,” run for the hills.
- What is the goal? Every person is different and deserves an investment program that complements their goals. At a minimum, this requires knowing how long you can invest your funds, how much volatility you can withstand, how much income you require, etc. Establishing a good relationship with an advisor requires you to know what your destination is.
- Do a background check. Whether through FINRA, the insurance commissioner, state securities board or the SEC, there are many ways to check out an advisor. Determine if there is a pattern of sanctions or litigation.
- Termination fees. Not all relationships last. If you move on, are there termination fees which may hold you hostage?
This offers a starting point. However, as with all things, a good deal of common sense and regular monitoring is necessary to keep your investment plan on target.
Dave Sather is the CEO of the Sather Financial Group, a fee-only and fiduciary investment management and strategic planning firm.