Financial fraud is common today -- no one is immune to solicitations from fraudsters. Chances are very good that one of these criminals has targeted you or a loved one recently.
Fraudsters go after older adults because they’re believed to be more trusting and socially isolated. Plus, they often have more assets to exploit. Bad guys rely on very common strategies to take advantage of their marks. “Recognizing these persuasion tactics will go a long way toward preventing you or a loved one from being victimized,” said Marti DeLiema, a post-doctoral fellow at the Stanford Center on Longevity.
DeLiema is one of the nation’s leading experts on financial fraud of the elderly. Here she describes seven tricks scammers use on their victims.
Fraudsters are always promising something to their victims. They might offer something desirable, like a free cruise, a pill to lose weight without diet or exercise, or a profitable investment opportunity.
Alternatively, they might claim something terrible has happened -- a grandson is in jail or taxes are owed and the IRS is calling to collect -- and you need to take action to protect your loved one or yourself. Their goal is to get you into a state of emotional arousal.
This can cause people to ignore their normally good judgment and is particularly true among older adults. Researchers at Stanford recently found that when older people are in a state of high emotional arousal -- either excited or angry -- they become more interested in purchasing items that were falsely advertised.
DeLiema recommends that you never accept an offer in the heat of the moment. Before paying any money, wait, think it over and discuss the offer with trusted friends and family members.
Another way to sidestep emotional arousal is to avoid conversations with fraudsters in the first place. Older adults should use caller ID, hang up the phone if they don’t recognize a caller and say “No” or “I’m not interested” right away if they feel pressured into making a decision about paying, donating or investing money.
Fraudsters may say things like “This deal won’t last,” or “This item is so popular, you better get it now while supplies last.” These scarcity messages create a sense of urgency and instill fear that you’ll miss out if you don’t act immediately.
DeLiema recommends a cooling-off period before paying any money. Put some time between hearing a pitch and making a decision. This is a useful practice before making any big financial decision and helps prevent buyer’s remorse.
Many sales representatives are told to give up on people who say “Let me think about it” after getting pitched a deal. It’s a better use of their time to move on to other potential marks.
People are much more likely to believe information when it comes from people and organizations they trust than from strangers. To use source credibility, fraudsters often pretend to be associated with a well-known company, firm, charity or government agency to create a false sense of legitimacy through name recognition. Brand association gives them more persuasive power.
DeLiema recommends doing your research. Ask for the solicitor’s credentials, and verify the answer by calling the organization directly. Most information and ratings about companies or nonprofit organizations can be found online.
For example, if the solicitor claims to be a financial adviser, check to see if he or she is registered with the Securities and Exchange Commission or with the state securities regulator, and then check credentials. If a caller claims to be a bank representative, hang up and contact the bank directly instead of providing any personal or financial details over the phone.
We often base our opinions and behaviors on cues from the social environment, such as how other people acted when they were in the same situation. Fraudsters will use this inherent social consensus against you. They make assertions like “Hundreds of people got rich off this investment. You wouldn’t want to be the only fool who missed out, would you?”
After hearing this statement, you might think, “What are the chances all those people were wrong?”
DeLiema recommends never trusting claims that “Everyone is doing it.” It’s critical to do a little research to validate these assertions. In particular, search for testimonials from real customers or investors, not those the solicitor mentioned.
The norm of reciprocity
Doing small favors for someone makes them more likely to return a bigger favor later on. The initial good deed creates a sense of indebtedness, and the other person feels obligated to agree to a later request. Ultimately, the fraudster benefits much more in this “norm of reciprocity” exchange.
DeLiema notes that the urge to reciprocate is strongest immediately following the initial favor. She recommends waiting to reduce the pressure to give something in return. Take a step back and evaluate whether the exchange is actually fair, and think about who’s really getting the better deal.
Fraudsters assume that older adults can’t process too much information at one time, making them more vulnerable to distraction. This and other sleight-of-hand techniques are also very effective when paired with emotional arousal.
If a solicitor is being vague about the details of the proposed deal or tries to change the subject, that’s a clear sign that something fishy is going on. Salespeople should give clear answers to questions about a contract’s fine print and what you’re being asked to sign.
This is a clever conversational device in which fraudsters use rhetorical questions to get you accustomed to agreeing with them. These questions appear to give you a sense of control over the interaction, but the conversation is actually structured -- or landscaped -- to give the fraudster an advantage at your expense.
Landscaping is effective because you’re led along until you’re backed into a corner from which you can’t escape. For example, a fraudster might ask any of the following questions:
- “Wouldn’t it feel great to be a millionaire?”
- “Don’t you want to leave a legacy for your children and grandchildren?”
- “Won’t you help your grandson get out of jail?”
Obviously the answer is “yes” to all these questions because the caller intentionally phrased them that way.
DeLiema recommends that people practice saying “No” to questions from solicitors and consider why anyone would even ask such obvious questions. Rhetorical questions are usually a strong clue that the salesperson is trying to be manipulative, and that should raise the level of skepticism about what might be asked next.
These seven tactics aren’t unique to financial fraud. You experience them often when deciding between legitimate goods and investments. The problem is that fraudsters also use these same persuasion tactics for illicit purposes. If you recognize these influence strategies, you can significantly protect your money from financial predators, legal or criminal.
DeLiema summed it up with great advice: “Get into the habit of using these suggested defenses for all important transactions to help you get the most from your hard-earned money.”
Excerpted with permission from “Tricks Fraudsters Use to Fool the Elderly,” a toolkit brief from the Stanford Center on Longevity.