This article describes the prime targets of those who would like to commit investment fraud. It will show people what the frauds’ tactics are and how they can combat them with their own stratagem.
Most people who have not been the victim of investment fraud most likely know someone in their intimate circles who has been. As the Willie Sutton principle advises, those willing to perpetrate fraud go where they will find people with money. More often than not, these are people who have retired and are living out their golden years. The next targets seem to be the Baby Boomers. They have spent their working years saving money in the 401(k) plans their employers offered them along with their other savings accounts, and they have a large amount of assets at their disposal right now.
Even though the frauds have specific targets, no one is immune to their treachery. This means that all potential victims have to do to come under these people’s radar is to have money. The best way to keep from falling prey to these people and prevent your loved ones from meeting this fate is to learn how they work their craft and report them to the proper authorities when you realize they are not worthy of your trust.
Who Are the Victims of Investment Fraud?
Those who are likely to be victims of investment fraud are not necessarily those who live alone, are too trusting or have fallen ill. They may appear to fit this characterization:
• Someone who readily makes decisions
• Someone who sees the glass as half full
• Someone who knows more about finances than most people
• Someone who earns a higher than average income
• Someone with a degree in higher learning
• Someone who had a medical or a financial crisis recently
• Someone who is always willing to listen to the latest sales pitch or innovative idea
If you know anyone like the above, you are on intimate terms with the most highly coveted target of the con artists.
How a Scam is Perpetrated
People know that “if it seems too good to be true, it probably is” but they do not know how to distinguish between the terms “good” and “too good.” No one has ever been able to draw a distinct line between the two and this is where the con artists have a foothold. They want their deals to sound both good as well as credible.
These people are very good at convincing others of things because they create psychological profiles and place their victims into the appropriate category. They seek to do this with personal questions that do not appear to be suspicious to the victims, including about their medical conditions, their families, their previous work experiences, what they think of the current political administration and what their favorite hobbies are. Now that they know what you care about most, they can use this information to their advantage to manipulate your decision-making process.
Some of their tactics that you will be able to recognize include the following:
• Suggesting that there is an inordinate amount of wealth out there that you are not privy to
• Promising that they are associated with a legitimate company or that they are experts in the area they are discussing
• Claiming that the smartest and the brightest are already involved in the venture
• Offering a small gesture that will need to be met with a larger one on your part, such as investing in their company
• Causing you to believe that you don’t have a lot of time to make a decision to purchase
You may already recognize the tactics described above. They are actually authentic methods that several marketers and salespeople use on a daily basis. The difference between the reputable marketers and the frauds is that the deals of reputable marketers will not disappear overnight.
To keep from being the victim of a fraud, follow these four principles:
- End your conversation by telling the fraud you are not interested and then hang up the phone. You may also state that you need to talk to someone first.
- Before the fraud can begin asking his or her questions, ask your questions first. You will want to know if they are registered with the SEC, FINRA or a state regulatory agency. Once you have the answers, follow up with those agencies and make sure you received the correct answers.
- You can also make sure the investment is properly regulated by asking if it is registered with the SEC or a state regulatory body. Then, check out the answer.
- Be sure to discuss the investment with friends, family or a financial advisor and beware of the person who wants you to keep it from all of those people.
Just by removing yourself from telemarketing call lists and junk mail lists, you will further decrease your chances of falling victim to this type of fraud.
Mark Fryman is an attorney at the securities law firm of StarrAusten.com. When he’s not researching investment fraud issues, he enjoys running, playing cards and watching the Indianapolis Colts win on Sundays.