With the Bernard Madoff scandal in the news, you might get the idea that investment scam artists only go after the super-wealthy. After all...that's where the big money is, right?

Wrong. According to attorney Steve Weisman, author of The Truth About Avoiding Scams, retirees are perhaps the group most-targeted by scammers. Why is that? Besides the fact that many retirees have substantial funds sitting in investments, he says scammers know that retirees tend to be overly trusting of others. Often, according to Weisman, their idea of a background check is if a person comes recommended by a friend and seems "very nice."

That's what happened to Larry and Leslee Collier, a couple in Sarasota, Florida who lost more than $400,000 to a local hedge fund manager. When I visited them, they showed me the monthly statements they received from the manager over the period of several years. Everything seemed very official, and the Colliers told me that the manager and his wife were "the nicest people you can imagine." Then one day, the manager disappeared--as did the money in their account. (The manager has since been arrested and charged with defrauding his investors. However, his clients' money remains at large).

Larry Collier told me only after the manager turned up in the headlines did he read about matters in the manager's background that should have raised red flags. Larry kept saying, "If only I had known these things before..." (We'll report on his story on NBR
on March 30).

Actually, you don't have to be Sherlock Holmes these days to uncover a potential scam artist. Both Weisman and author Jonathan Pond suggest that before you invest, simply go online to Google and type in the name of the person (or firm) you plan to invest with along with the terms "scam"or "ripoff." Often that will reveal if a person has something to hide. Of course, it's also a good idea to find out if the investment manager is registered with the SEC, FINRA and/or your state securities office.

It also helps if your securities and cash are held not by the investment manager's office, but by a third-party custodian firm. That way, you'll have someone other than the manager reporting on what is in your account.

And here's another suggestion, from our series advisor Lewis Mandell. He says check on the auditor of your investment manager. If you can confirm that it is a national or large regional accounting firm, then at least you'll have a chance of recovering some funds from it in the event of fraud.

According to noted CFP Deena Katz, what it really comes down to is: "never let anyone care more about your money than you do." She says that means knowing the facts--and not just someone's story--before you spend or invest. Unfortunately, that's something the Colliers found out too late.