Criminals who commit investment fraud have many strategies for converting prospects into victims.

Researchers describe those strategies in a study based on an analysis of 128 tape-recorded conversations involving fraudulent sales representatives along with a comparison of 150 investment fraud victims and 165 non-victims.

The authors of the study, which was released by the NASD Investor Education Foundation, Washington, found that investment fraud criminals used an average of 8.6 persuasive tactics per conversation transcript.

“The effect of multiple tactics is to put the victim in a kind of psychological haze that somehow changes what might otherwise be a normal ability to spot and resist persuasion,” the authors of the study write.

The most common psychological tactics used by fraud criminals were credibility, phantom fixation, and social consensus, the researchers report.

The researchers compared lottery ticket fraud and investment fraud to learn how fraud criminals tailor conversations to fit intended victims.

Lottery pitches focus almost entirely on the size of a phantom prize, while investment fraud pitches involve long or repeated conversations that help the criminal get the personal information needed to profile the victim, the researchers write.

Researchers were surprised to discover that investment fraud victims outscored non-victims on 8 financial literary questions. The fraud victims scored higher even than non-victims who were classified as “likely active investors.” The results suggest that financial literacy programs are not sufficient to prevent fraud, according to NASD officials.

Compared with non-victims, investment fraud victims were more likely to be male, married, well-educated and earning a high income.

Investment fraud victims also were more likely to say that they rely on their own experience and knowledge to choose investments instead of conferring with friends, financial advisors, or others.

The researchers conclude that financial literacy programs should be expanded to include information about how fraud criminals’ persuasive tactics work.

The researchers also recommend encouraging seniors to report investment fraud to securities regulators, studying the efficacy of persuasion education, and studying consumers’ ability to resist to persuasion in different settings.