It's a sad truth, but older investors are increasingly at risk for investment fraud and stockbroker misconduct. These scams work because they seem to specifically take advantage of those who have free time and are eager to socialize—such as retired seniors. Fraudsters try to gain your parents' trust by being a "best friend" and calling often or offering to buy lunch.
Once the fraudster has managed to get an "in" with your Mom and Dad, they will then tailor their tactics and lies to your parents' needs—promises of high returns for rolling funds into an unsuitable annuity, using guilt regarding a spouse's health, or otherwise creating pressure to invest right away. Because your parents trust them, they may not look as closely or do any background work.
Why Do Fraudsters Target My Parents?
Investment scams target your parents because that's where the money is—and because fraudsters see seniors as an easy sell. Additionally, senior investors are vulnerable because of:
Cognitive impairments. Not only do elderly investors make their own financial mistakes as cognitive ability declines, but fraudsters take are more than happy to take advantage of those who seem confused and have memory trouble.
Loss of a spouse. If your Dad has always handled the budget and has passed away or become very ill, Mom may suddenly be in charge of the finances. This can be very intimidating, especially if there are additional cognitive impairments.
More time. Your parents may have more time to take calls or attend "free lunch" investment seminars, giving fraudsters a much better chance to charm your parents into their scams.
Fear of being "rude." If a pitch turns aggressive, many elderly investors will bend to the pressure just to avoid being "mean." This is especially true in cases of affinity fraud where your parents often speak to the fraudster or his clients socially.
What Can I Do to Help My Parents or Loved Ones?
The most important step is to open the lines of communication. Look at common scams together, talk about ways to research, and pay attention to who they are spending time with. If you can't dissuade your parent from a “fishy” investment, then attend the seminar or meeting along with them. Talk about it afterward as you go over documents. The signs of fraud are often right in front of your nose—and just learning how to spot false promises can go a long way toward prevention.
Here are some examples of potential false promises to watch out for:
- “It won’t be available tomorrow.”
- “There is absolutely no risk.”
- “Your returns are guaranteed.”
- “Sign up now, and I’ll send you the rest of the documentation later.”
- “It is an once-in-a-lifetime opportunity.”
9 Tips to Help Seniors Avoid Investment Fraud
Here are tips for protecting yourself or your elderly parents from senior investment fraud:
- Check your statements. Many of us stop checking our statements after a while and assume our financial advisor or broker is taking care of it. Of course, that's exactly what unscrupulous fraudsters rely on. Carefully examine all of your statements and documents, and make sure everything looks the way it should.
- Do your research. Before you take advantage of any investment opportunity, take the time to look into it. Make sure you understand how the investment works, how you will be paid, and if there are any hidden fees or tax penalties.
- Ask a lot of questions. Often, people touting fraudulent investment deals will avoid answering questions. They will make the investment sound too complex to explain or they will dodge your questions all together. One of the questions you might ask would be—is the firm registered with FINRA, the Securities and Exchange Commission (SEC) or the state? Also, ask if the securities are registered.
- Verify the information. After you ask your questions, confirm what you were told. Don’t simply rely on the salesperson’s answers. Use FINRA’s BrokerCheck and contact the appropriate regulatory agencies to verify the information. If the securities are supposedly registered with the SEC, double check with SEC’s EDGAR database.
- Ignore unsolicited calls and emails. It's very unlikely that an email or phone call from someone you haven't dealt with in the past is going to end up being a legitimate investment opportunity. It's recommended that you just ignore any unsolicited investment opportunity you come across. If feel you absolutely must check into it, then be sure you are meticulous in your research, and approach it with suspicion.
- Don't be pressured to "act now." Many fraudsters get away with their schemes by offering an enticing investment, but claiming you only have a limited time to take advantage of it. It is very rare for any legitimate investment to require you to act right away. Always "sleep on it."
- Keep control of your cash. Some of us have been working with the same financial advisor for years and trust them enough to turn over control of our investment accounts to them. No matter how well you know your advisor, make sure you control your cash and know what's happening with your portfolio.
- Don't get fooled twice. You've already been taken in by investment fraud, and now you're getting offers to help you recover your cash or invest in something that's twice as good as the last thing. Look out—scammers are increasingly using this tactic to hit victims of investment fraud again and run with more of your cash.
- Get outside advice. Talk with a financial professional whom you trust or a family member about the deal you are being offered. Scam artists will sometimes make statements that you shouldn’t tell anyone about the “special deal.” Don’t fall for that line.
How to Investigate a Stockbroker or Investment Without a Computer
You may have elderly loved ones whom you are afraid might be susceptible to financial scams. If your loved ones aren't Internet-savvy, there are still certain measures they can take to avoid investment scams. The internet is a powerful tool for investigating potential investments, investment advisors, and stockbrokers, but it is not the only investigative tool.
We understand that many seniors do not regularly use a computer and may not want to rely on family and friends to do the research for them. Accordingly, we will provide three ways a senior citizen can distinguish between a scam artist and an honest stockbroker without the help of Google. We encourage you to print it out and share it with any senior who may be interested.
A lot of valuable information can be found about a stockbroker or specific investment without the aid of a computer. Specifically, you may consider doing the following:
- Meeting Face to Face with the Broker. A lot of information can be uncovered in a face-to-face meeting. Was the broker able to answer all your questions in a way that you could understand? Did the broker make eye contact and seem comfortable recommending realistic-sounding investments? What did your gut tell you after the meeting?
- Verifying What Is Said at the Meeting. Contact FINRA, SEC, or the Ohio Department of Commerce to verify the information you have been given and to ask questions.
- Talking to a Financial Professional You Trust. Have you worked with someone who has already proven himself trustworthy, or do you have a friend or relative in the business? Consider asking that professional for his or her input on a particular broker or investment.
Despite your best efforts to protect yourself from investment fraud, some scam artists are really good at what they do, and you could be the victim of an investment scam. If that happens, please call an experienced and empathetic investment fraud lawyer at Meyer Wilson: (888) 390-6491.