Senior Housing Connection

three ladies


Wednesday, January 18, 2012

As last century's legendary bank robber, Willie Sutton, said: the fraudsters usually go "where the money is." That means that fraudsters target citizens who are retired or who are about to retire, as well as baby boomers who have been accumulating a big sum of money through their 401(k) retirement plans and their personal bank accounts. 

The reality is that we are all at risk. Nevertheless, you can help protect your family and friends by recognizing how financial fraudsters work and by reporting fraudulent investment sales pitches or a real scam to the authorities. The key is to recognize an investment offer that sounds "too good to be true." Fraudsters are masters of persuasion and adapt their pitches to the economic profiles of their victims. They may ask their victims casual questions about their health, family, political beliefs, hobbies, or previous employments. Once they identify a victim's weak points, they will overwhelm them with an array of tactics that would leave even the most astute person confused.

Some of the most common tactics are:

  • The "phantom riches" tactic: This tactic tries to persuade you that with "this investment" you will obtain something you want but cannot have. For example, a fraudster might guarantee you that "the oil wells (in X, Y place) will produce an income of $6,800 monthly, guaranteed!"
  • The "credibility source" tactic: This tactic tries to achieve credibility by means of claiming to belong to a prestigious firm or having a "certain" experience or special connection. For example, a fraudster might say, "Believe me, being the vice president of X,Y firm I would not sell an investment that would not yield earnings."
  • The "social consensus" tactic: This tactic tries to lead you to believe that other wise investors have invested already. For example, a fraudster might say, "This is how So-and-So started. I know it is a lot of money but I am investing also, as well as my mom, half of her church, and it is worth every penny."
  • The "reciprocity" tactic: This tactic tries to trick you by offering to do you a small and simple favor in exchange of a "great" favor. For example, a fraudster may say, "If you buy right now, I will lower my commission to half." Do you recognize some of this tactics?

Here are a few strategies to counteract them:

  • Finish the conversation: Practice saying "no." Simply say to the "investor" that called you: "Sorry, but I am not interested. Thank you for calling, good-bye." Or say, "Sorry, but I do not make decisions without consulting ____." Fill in the blank with whomever you wish, your partner, son, lawyer, or financial consultant.

Take control and ask the questions:

  • A legal investment agent must have a license, and they must be registered with FINRA, SEC (Securities and Exchange Commission), or with a state securities regulator, depending on the type of business that the agent conducts. Verify the answers by calling for free at (800) 289-9999 or visiting FINRA's website.

FINRA Investor Education Foundation

The FINRA Investor Education Foundation, established in 2003 by FINRA, supports innovative research and educational projects that give underserved Americans the knowledge, skills, and tools necessary for financial success throughout life. For details about grant programs and other FINRA Foundation initiatives, visit.