Retirees are often the targets of investment fraud schemes. These sophisticated schemes may appear to be genuine investments from sincere and bona fide brokers or companies, but are actually intended to steal funds from would-be investors. However, they don’t target retirees necessarily because they think they’re easy marks.
Retirees have money to invest.
Just as rats don’t go looking where there is no food, investment scammers don’t go after groups of people who have no money to invest. Retirees often have money to invest and time to think about investing. Usually, if they have children, they have an empty nest, and if they have a home, the mortgage is paid off. They’re usually not looking to make another major purchase, either. Also, retirees no longer receive a salary or wages, so they’re more likely to seek income from investments.
However, they’re not naïve, and fraudsters know that.
Investment frauds are inherently sophisticated. For example, a Ponzi scheme, like the one Bernie Madoff created, may seem very simple in hindsight. However, it was a complex series of investments and payouts designed to look thoroughly legitimate to lure in more investors. Scammers aren’t going to waste time teaching someone the basics of finance. Investment fraud targets specific individuals who not only have the means to invest, but have the sophistication to do so.
Who is vulnerable to investment fraud?
According to a study done by the AARP, retirees who are male, consider making money a major life goal, and make 5 or more investment trades per month are the most likely to be targeted and fall for investment scams. However, someone looking to defraud can aim for anyone with means, so it’s important to know what to look for if you’re a possible target.
You can spot a swindle if you know what to look for.
There’s a few ways to avoid falling for a fraudulent investment scheme, and if you see any of the following red flags, proceed with caution:
- They came to you.
A surprising amount of investment fraud starts with a phone call or email spam. This could be another reason retirees are targets for investment scams: Millennials don’t like to use their phones to talk, but Baby Boomers still prefer to deal with a real person when making a transaction or purchase. Be wary if a broker or investment firm seeks you out personally to offer the deal of a lifetime.
- You have to take action RIGHT NOW!
Fraudsters understand how your brain can work against you. Our brains release endorphins when we think quickly, and when we feel good, we feel good about the decisions we make in the moment. Most scams require an immediate action or decision before the sparkle fades.
- If it’s too good to be true, it probably is.
Does it promise a guaranteed return? Perhaps15% or more return on investment? Will you see your return in six months? Is it the next Apple or Amazon, but you’ve never heard of it? Are you being offered this deal because you’re special? No one can know the future, or exactly how wildly successful a stock may be.
If you suspect fraud, say something.
You can report suspected and actual investment fraud to the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and to the state attorney general. Even if it turns out that you’re wrong, it’s better to be wrong than sorry. However, if you think you have been the victim of investment fraud, speak to an experienced securities lawyer to find out if you can get your money back.