Canadians who are promised unreal financial returns with unusually low risk should look hard before placing their cash in such investments, according to a group representing the country's financial advisers.

Advocis, the Toronto-based organization which promotes the interests of the country's 10,000 personal money experts, said Thursday people should be wary of investment firms predicting large returns with little risk to their cash.

"It comes down to the simple old saying, 'If it's too good to be true then it probably is,' " said Greg Pollock, Advocis' president and chief executive officer.

Quebec's financial fraud

The advice comes in the wake of the latest apparent financial scandal.

Quebec-based financial investment stalwart Earl Jones disappeared in July, accused of stealing as much as $50 million from investors, some of whom had dealt with Jones over many years.

More than 150 investors attended a meeting to find out more about missing financial adviser Earl Jones and the money they gave him to invest. (CBC)

It is unclear what form Jones's alleged fraud took, although Quebec securities authorities suspect his company — Earl Jones Consultant and Administration Corp. — was running a so-called Ponzi scheme.

Jones has not been charged, and the allegations against him have not been proven in court.

"A Ponzi or pyramid scheme is an investment opportunity built on a fraud that will eventually collapse," Pollock said.

This type of fraud is named after Charles Ponzi who, in the early 1920s, promised to double investors' money within three months through the redemption of discounted postal reply coupons.

Nowadays, a Ponzi scheme is a type of pyramid investment whereby the fraud artist takes the cash from new investors to give to older clients. The ploy usually collapses once people realize there are discrepancies with the underlying investments — if there are any.

Advocis' Pollock said warning signals include:

• Promises of "special arrangements" for that individual.
• Advisers that push investors to place their cash in structures that involve more financial risk than the person is willing to assume.
• Claims that financial structures are "too complicated" to be explained.

Growing rogue's list

Bernard Madoff is perhaps the investment world's "ace of spades" after the New York investment guru snatched as much as $65 billion US from trusting clients.

But the 71-year-old Madoff, who pleaded guilty to a variety of charges and is currently serving 150 years in a U.S. prison, was not the only one under fire these days:

• U.S. billionaire Allen Stanford is currently under indictment for allegedly running an $8-billion Ponzi scheme.
• In 2008, George Theodule was sued by the U.S. Securities and Exchange Commission, which alleged he had cheated $23 million mainly from Haitian Americans.
• Danny Pang is accused in California of misusing investor money to the tune of approximately $600 million.

By contrast, Robert Vesco, who was involved in the prominent Overseas Investors Services fraud, was accused of stealing $224 million from investors in the 1970s and 1980s. He fled the U.S. and later died in Cuba.