Anyone can be caught in a financial scam, but some people are in greater peril than others. Importantly, the most vulnerable are not who most people would expect, especially the potential targets.
A clear profile of the most likely financial fraud victims emerges from research over the last few years, including two recent projects conducted for AARP. The research presents both a profile of those most likely to be scammed and also the times when each of us is most vulnerable.
A key to remember is that if you believe you aren’t likely to be scammed, then you’re at greater risk than others.
As we discussed in the past, we can dispose of the most likely fraud victim being a frail, isolated, elderly person with reduced cognitive abilities. That person is likely to be a victim of financial abuse, often by a friend or relative, but is less likely to be a fraud victim.
The most likely financial fraud victims are men age 70 and over. Also, the more of a risk-taker a person is, the more likely he or she is to be scammed. The victims also tend to view money and wealth as a sign of success, seeing acquiring wealth as an important achievement in life.
The likely victim also welcomes investment sales pitches. Even after being scammed, they continue to be open to and even seek new and unconventional investment opportunities, sometimes reasoning that they need to make up their previous losses.
Likely victims also are especially attracted to unregulated investments and those that others don’t seem to know about or have access to. Plus, they’re attracted to promises of higher returns and other exaggerations.
The likely victims also have some habits that signal to con artists that they are potential targets. They are more likely to receive and to entertain unsolicited telephone calls, mail and email regarding investment opportunities. They tend to trade in their portfolios more frequently than others.
People who are swindled tend to be very comfortable doing business with strangers and people who make unsolicited contact with them. Most frauds depend on people being willing to invest with a stranger, often someone they never meet and have contact with only through the telephone, mail, or email. It’s true that some headline-making scams were perpetrated by someone well-known to the victims. Most frauds, however, don’t make headlines. They’re run anonymously by people who often don’t meet their victims or even talk to them over the telephone.
Each of these characteristics is not essential to being a fraud victim, but the more of these qualities that fit a person’s profile, the more likely that person is to be swindled. If you have several of these traits, you should reconsider your investment behavior or increase your safeguards against fraud.
That’s the profile of likely scam victims. Now, let’s look at when older people are most likely to be susceptible to a fraud.
Emotions play a major role in being vulnerable to fraud, according to the AARP.
Con artists work to trigger emotional reactions among potential victims. Older people are more susceptible to fraud when emotions are high than younger people are. It doesn’t matter whether the emotion is positive or negative (excitement or anger). A heightened level of emotion is more likely to lead to bad money decisions among older people. Emotions tended to have no effect on whether or not younger people fell for frauds.
The bottom line is there are two keys to avoiding fraud.
The first key is to be aware of your emotional state. When you realize that a sales pitch is triggering excitement, anger or some other emotion, slow down. You don’t want to make a financial decision when emotions are elevated. Be suspicious of any financial pitch that’s trying to charge your emotions, especially if you’re being pressured to act quickly.
The second key is to seek opinions from people you know and trust. If you don’t have a long-time financial advisor, you should have friends or relatives who have some knowledge of and common sense about money. Ask what they think about the idea.