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Ways Seniors Can Avoid Financial Scams

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What Are Some Ways That Seniors Can Avoid Financial Scams?

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 others 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.
  • Isolation. Without regular interactions, it is easy to fall prey to investment schemes and even harder for others to uncover misconduct. 
  • Financial Taboos. Seniors are often hesitant to discuss their finances with friends and family and often internalize investment losses. 
  • 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. Most seniors are not comfortable talking about financial matters, so you may need to take the initiative. 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 parents 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:

  1. 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 investment professionals rely on. Carefully examine all of your statements and documents, checking for large losses in value, changes in asset allocation and unrecognized withdrawals. 
  2. 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, is it illiquid, how you will be paid, and if there are any hidden fees or tax penalties.
  3. Ask a lot of questions. And, be concerned if the salesperson avoids answering them. If the investment professional makes the investment sound too complex to explain or they dodge your questions all together. Ask if the firm registered with FINRA or the Securities and Exchange Commission (SEC)? Also, ask if the securities are registered and if so, with who.
  4. 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 registered with the SEC, double check with the SEC's EDGAR database.
  5. 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. If you feel compelled to check into it, then be sure you are meticulous in your research, and approach it with suspicion.
  6. Don't be pressured to "act now." High pressure sales tactics are used by financial advisors. They offer an enticing investment, but claim 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 take time to research and consider a potential investment.
  7. Keep control of your cash. You may have worked 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 maintain control over your assets and know what's happening with your portfolio.
  8. Don't get fooled twice. If you have already been the victim of misconduct, 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, be dubious. Fraudsters are increasingly using this tactic to hit victims of investment fraud. 
  9. Get outside advice. Talk with a financial professional whom you trust or a family member about the deal you are being offered. If you are being discouraged from discussing the investment, it should be seen as a red flag for misconduct.  

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. 

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 your state’s Division of Securities 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 unscrupulous financial advisors 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 today.

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