Hunger. Desire. Fear. Pain. Scam artists often succeed by pushing the same emotional buttons that advertisers use to persuade people to buy legitimate goods and services. As a result, consumers may find it hard to distinguish scam artists from anybody else they encounter in the legal economy. These subjects and more were discussed in a recent gathering at the Stanford Center on Longevity (SCL).
Scam artists target older Americans for the same supposed reason that Willie Sutton robbed banks: "Because that's where the money is." Generally speaking, older people have accumulated more money than those in younger generations. Add in seniors' vulnerability due to isolation, loneliness and possible cognitive decline, and you've got a powerful combination of factors that explain why many scam artists prefer to target older citizens.
One presenter at the SCL meeting profiled two types of fraud victims among the elderly:
- Older single women, often widows, with low education, income and financial literacy often fall victim to bogus prize scams where you have to pay a modest sum to win a "sure-thing" larger prize.
- Married, middle-aged adults who are relatively wealthy and comfortable with risk-taking aren't immune, either. They can fall victim to investment fraud by pouring money into offerings that promise high returns with no risk. But these fraudulent investments do turn out to be "too good to be true."
Scam artists often arouse their victims emotionally, to override their usual good judgement. These techniques are similar to advertising that attempts to persuade you to buy legitimate goods and services. In addition, scam artists employ other influencing tactics, such as establishing legitimacy and authority, building rapport with their victims, being persistent, distracting their victims and imparting a sense of urgency (act now!).
If you or a family member are in your 6os or older, what can you do to protect yourself and your loved ones from scammers out to take your money? A few simple commonsense strategies will go a long way toward preventing a financial loss due to fraud:
- Recognize when someone has made you feel angry, fearful, envious, hungry or desiring money or luxury items. Don't buy or invest in anything when you feel that way! Wait a few days for your emotions to subside, then decide if you really should make that expenditure or investment.
- Anybody who says "Act now!" is someone to avoid. Legitimate purchases or investments don't go away the next day.
- Take the time to identify places to invest that are safe from fraud, and keep your money there. At the top of this list are employer-sponsored pension and 401(k) plans. They're governed by federal laws that protect your interests, and your employer and the professionals who operate these plans typically serve as fiduciaries on your behalf. In addition, the vast majority of banks, insurance companies and mutual fund companies are governed by laws, regulations and internal controls intended to protect you from fraudulent losses.
- Build an inner circle of trusted family and friends with whom who you can discuss any large expenditures or investments. They can serve as a sounding board and help you see through bogus claims. It's OK to say, "I need to discuss this with my husband/wife/brother/sister/son/daughter." Let scammers know you have protection.
Regarding this last point, make sure your inner circle is worthy of your trust. Many frauds are perpetuated by close family members or friends who steal money from older retirees who have misplaced their faith.
Like any other aspect of your financial planning, put in some time and effort to make sure you safely finance your retirement, not an easier life for some crook.