How older Americans can avoid investment fraud and abuse
Older Americans are the number one target of investment
con artists. Additionally, stockholders and financial planners who engage
in abusive practices often seek out the elderly. The files of state
securities agencies are filled with tragic examples of senior citizens
who have been cheated out of savings, windfall insurance payments, and
even the equity in their own homes. Fortunately, such victimization
can be avoided by following ten self-defense tips developed for older
Americans by the North American Securities Administrators Association,
Inc. (NASAA).
Don't be a "courtesy victim." Older Americans
are of the generation that was taught to be courteous at all times to
phone callers, as well as people who visit them at home. Con artists will
not hesitate to exploit the good manners of a potential victim. Remember
that a stranger who calls and asks for your money is to be regarded with
the utmost caution. You are under absolutely no obligation to stay on
the telephone with a stranger who wants your money. In these circumstances,
it is not impolite to explain that you are not interested and hang up
the phone. Save your good manners for friends and family members, not
swindlers!
Check out strangers touting "strange" deals.
Trusting strangers is a mistake that all to many older Americans make
when it comes to their personal finances. Say "no" to any investment
professional or con artists who presses you to make an immediate decision,
giving you no opportunity to check out the salesperson, firm and the investment
opportunity itself. Extensive background information on investment salespeople
and firms is available from the Central Registration Depository (CRD)
files available from your state securities agency. (See our contact
information section or call NASAA toll-free at (888) 84-NASAA.) Almost
all investment opportunities must be registered for sale in the state
in which you live. Your state securities agency can tell you if the investment
opportunity is properly registered. Before you part with your hard-earned
savings, get written information about the investment opportunity, review
it carefully, and make sure that you understand all the risks involved.
A favorite tactic of telemarketing con artists is to develop a false bond
of friendship with older Americans. Swindlers know that many senior citizens
are eager to have someone to talk to on the phone ... even a complete
stranger. If you are dealing in person with a stockbroker or financial
planner, do not be swayed by offers of unrelated advice and assistance
that are merely efforts to develop a sense of friendship and even dependency.
If you are lonely and in need of companionship, don't make the mistake
of seeking it from someone whose only real interest is to get his or her
hands on your money.
Always stay in charge of your money. A stockbroker, financial
planner or telemarketing con artist who wants your money will be more
than happy to assure you that he or she can handle everything, thereby
relieving you of the need to watch over and protect your nest egg. Beware
of any financial professional who suggests putting your money into something
you don't understand or who urges that you leave everything in his or
her hands. Constant vigilance is a necessary part of being an investor.
If you understand little about the world of investments, take the time
to educate yourself or involve a family member or a professional, such
as your banker, before trusting a stranger who wants you to turn over
your money and then sit back and wait for results.
Never judge a person's integrity by how they sound. All
too many older Americas who get wiped out by con artists later explain
that the swindler sounded like such a nice man or woman. Successful con
artists sound extremely professional and have the ability to make even
the flimsiest investment deal sound as safe and sound as putting money
in the bank. Some swindlers combine professional-sounding sales pitches
with extremely polite manners, knowing that many older Americans are likely
to equate good manner with personal integrity. Remember the sound of a
voice, particularly on the phone, has no bearing on the soundness of an
investment opportunity.
Watch out for salespeople who prey on your fears. Con
artists know that many older Americans worry they will either outlive
their savings or see all of their financial resources vanish overnight
as the result of a catastrophic event, such as a costly hospitalization.
As a result, it is common for swindlers and abusive salespeople to pitch
the schemes as a way for older Americans to build up their life savings
to the point where such fears are no longer necessary. Remember that fear
and greed can cloud your good judgment and leave you in a much worse financial
posture. An investment that is right for you will make sense because you
understand it and feel comfortable with the degree of risk involved.
Exercise particular caution if you are an older woman
with no experience handling money. Ask a con artist to describe his ideal
victim and you are likely to hear the following two words: "elderly
widow." Sadly, many women who are now in their retirement years often
received little or no education in their youth about how to handle money.
Women of this generation often relied on their husbands to handle most
of all major money decisions. As a result, older women, particularly those
who have received windfall insurance payments in the wake of their spouse's
death, are prime targets for con artists. Elderly women who are on their
own and have little know-how about handling money should always seek the
advice of family members or a disinterested professional before deciding
what to do with their savings. One excellent resource available nationwide
is the Women's Financial Information Program at the American Association
of Retired Persons (AARP). For more information, write: "Women's
Financial Information Program," AARP Consumer Affairs, 601 E St.,
NW, Washington, DC 20049.
Monitor your investments and ask tough questions. Too
many older Americans not only trust unscrupulous investment professionals
and outright con artists to make initial financial decisions for them,
but compound their error by falling to keep an eye on the progress of
the investment. Insist on regular written and oral reports. Look for signs
of excessive or unauthorized trading of your funds. Do not be swayed by
assurances that such practices are routine or in your best interests.
Do not permit a false sense of friendship or trust keep you from demanding
a routine statement of your savings. When you suspect that something is
amiss and get unsatisfactory explanations, call your state securities
agency and make a complaint.
Look for trouble retrieving your principal or cashing
out profits. Many older Americans have little ongoing need for investment
funds, while others require returns that are paid out regularly in order
to supplement limited incomes. If a stockbroker, financial planner or
other individual with whom you have invested stalls you when you want
to pull out your principal or profits, you have uncovered someone who
wants to cheat you. Since unscrupulous investment promoters pocket the
funds of their victims and go to great lengths to explain why an investor's
savings are not readily accessible. In many cases, they will pressure
the investor to "roll over" non-existent "profits"
into new and even more alluring investments, thus further delaying the
point at which the fraud will be uncovered. If you are not investing in
a vehicle with a fixed term, such as a bond, you should be able to receive
your funds or profits within a reasonable amount of time.
Don't let embarrassment or fear keep your from reporting
investment fraud or abuse. Older Americans who fail to report that they
have been victimized in financial schemes often hesitate out of embarrassment
or the fear that they will be judged incapable of handling their own affairs.
Some senior citizens have indicated that they fear that their victimization
will be viewed as grounds for forced institutionalization in a nursing
home or other facility. Recognize that con artists know about such sensitivities
and, in fact, count on these fears preventing or delaying the point at
which authorities are notified of a scam. While it is true that most money
lost to investment fraud is rarely recovered beyond pennies on the dollar,
there are also many cases in which older Americans who recognize early
on that they have been misled about an investment are then able to recover
some or all of their funds by being a "squeaky wheel." A good
resource for older Americans who fear that they have been victimized is
the securities agency in the state in which they live. (See our contact
information section or call NASAA toll-free at (888) 84-NASAA.)
Beware of "reload" scams. Younger Americans
who are ripped off by swindlers are fortunate to the extent that they
have the opportunity to pick themselves up and restore some or all of
their losses through new earnings. Most older Americans, however, are
dealing with a finite amount of money that is unlikely to be replenished
in the event of fraud and abuse. The result is a panic that is well known
to con artists, who have developed schemes to take a "second bite"
out of senior citizens who already have been victimized. Faced with a
loss of funds, some senior citizens will go along with another scheme
(allowing themselves to, in effect, be reloaded) in which the con artists
promise to make good on the original funds that where lost... and possibly
even generate new returns beyond those originally promised. Though the
desire here to make up lost financial ground in understandable, all too
often the result is that unwary senior citizens lose whatever savings
they have left in the wake of the initial scam and possibly more in the
second scam.
If you have questions please contact: Investor
information, Division of Finance & Corporate Securities, (503) 378-4387.
