How Senior Citizens Can Avoid Investment Fraud
Senior citizens are the number one target of investment con artists. The files of state securities agencies are filled with tragic examples of senior citizens who have been cheated out of life savings, windfall insurance payments, and even the equity in their own homes.
Illegal telemarketing is a crime, and fraudulent telemarketers are criminals. There are an estimated 14,000 illegal telemarketing operations bilking thousands of victims every day. This fraud adds up to at least $40 billion annually, according to congressional surveys. Additionally, surveys by the American Association of Retired Persons indicate that over one-half of those victims are age 50 or older.
Fortunately, such victimization can be avoided by following 10 self-defense tips. These tips were developed by the North American Securities Administrators Association (NASAA), which is the national voice of the state securities agencies responsible for investor protection at the grassroots level in the United States.
- It is hard to tell if a caller is legitimate. The sound of the voice on the other end of the phone may sound like a nice person; however, remember that the sound of a voice has no bearing on the soundness of an investment opportunity. Successful con artists sound extremely professional and have the ability to make even the flimsiest investment deal seem as safe as putting money in the bank. Some swindlers combine professional sounding sales pitches with extremely polite manners, knowing that many people are likely to equate good manners with personal integrity.
- You can hang up. Senior citizens are of the generation that was taught to be courteous at all times to phone callers, as well as to people who visit them at home. Swindlers know how to take control of the conversation, either by pretending to be very friendly or by using bullying tactics. 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 deals. Trusting strangers is a mistake that all too many senior citizens make when it comes to their personal finances. Before buying anything, tell the caller that you want to check it out first, and ask them for a number to call back. If the caller refuses to give the number or insists on an immediate decision, it's a "red flag of fraud."
- 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, therefore relieving you of the need to watch over and protect your nest egg. 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. Also, involve a family member or a trusted professional with a good reputation in your known community before trusting a stranger who wants you to turn over your money and then sit back and wait for results. 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.
- Monitor your investments and ask tough questions. It is important 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 interest. Do not permit a false sense of friendship or trust to keep you from demanding a routine statement of your investments. When you suspect that something is amiss and get unsatisfactory explanations, call the Securities Division of the South Carolina Attorney General's Office at (843) 734-9916 and make a complaint.
- Watch for salespeople who prey on your fears. Con artists know that many senior citizens 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 to pitch the schemes as a way for senior citizens 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.
- Having trouble retrieving your principal or cashing out profits? If a stockbroker, financial planner or other individual with whom you may have invested stalls you when you want to pull out your principal or profits, you may have uncovered someone who wants to cheat you. 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. Many times, 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 reasonably brief amount of time.
- Exercise particular caution if you are a woman with no experience handling money. Sadly, many women who are now in their retirement years often received little or no education in their youth about how to handle money. Many relied on their husbands to handle most or all major money decisions. As a result, those who have received windfall insurance payments in the wake of their spouse's death are prime targets for con artists.
- Seek Advice. Elderly women who are on their own and have little know-how about handling money should always seek the advise of family members or an impartial professional before deciding what to do with their savings. One excellent resource is the Women's Financial Information Program at the American Association of Retired Persons (AARP).
- Beware of "reload" scams. Most senior citizens are dealing with a finite amount of money that is unlikely to be replenished in the event of fraud and abuse. When such a loss occurs, the result is a panic that is well known to con artists, who have developed "reloading" schemes to take a "second bite" out of senior citizens. In these schemes, seniors who already have been victimized once are solicited by con artists who promise to make good on the original funds that were lost, and possibly even generate new returns beyond those originally promised. Though the desire to make up lost financial ground is 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 possible more in the second scam. Remember the saying: "Fool me once, shame on you. Fool me twice, shame on me!"
- Don't let embarrassment or fear keep you from reporting investment fraud or abuse. Senior citizens 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.
- It is true that most money lost to investment fraud is rarely recovered. However, there are also many cases in which senior citizens 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." If you fear that you have been victimized, please contact the Securities Division of the South Carolina Attorney General's Office immediately. Don't delay! Reporting suspected telemarketing crime is essential to stopping it.
HOW TO INVESTIGATE BEFORE YOU INVEST:
First, take time to check out the salesperson, firm and the investment opportunity itself. Extensive background information on investment salespeople and firms is available free of charge from the Central Registration Depository (CRD) files available from the Securities Division of the South Carolina Attorney General's Office. This office can also tell you if the investment opportunity is properly registered as required in order to be sold in South Carolina.
Second, before you part with your hard-earned cash, get written information about the investment opportunity, review it carefully, and make sure that you understand all the risks involved. Any reputable offering should have written information available which should be willingly sent to you.
Third, do not be swayed by offers of unrelated advice and assistance that are merely efforts to develop a sense of friendship and even dependence. Swindlers know that many senior citizens are lonely, in need of companionship and eager to talk to someone. Don't make the mistake of seeking this companionship from someone whose only real interest is to get his or her hands on your money.
WHERE TO GET HELP
Office of the Attorney general
P.O. Box 11549
Columbia, SC 29211-1549
U.S. Securities and Exchange Commission (SEC)
Consumer Information Line
450 Fifth Street, N.W.
Washington, DC 20549
Phone: (800) 732-0330
National Association of Securities Dealers (NASD)
Office of Communications
1735 K Street, N.W.
Washington, DC 20006
"Women's Financial Information Program"
National Association of Retired Persons (AARP)
AARP Consumer Affairs
601 E Street, NW
Washington, DC 20049
Phone: (800) 424-3410
Investment Company Institute
Mutual Funds and Unit Investment Trusts)
1401 H Street, NW, Suite 1200
Washington, DC 20005-2148
National Fraud Information Center