I am an older male and married. I’m also a war veteran who values wealth accumulation as a significant measure of success in life. Although I’m ideologically conservative, I’m willing to take risks and am open to unsolicited telephone and email sales pitches.
No, this is not a profile for an online dating site for open marriages. This is the demographic profile of Americans who are most likely to become victims of financial fraud, according to a new survey by the AARP Fraud Watch Network.
“While previous surveys in this area have developed a demographic picture of investment fraud victims — usually older, financially literate males who are more educated and have higher incomes — our goal with this survey was to learn about why people fall prey and how it can be avoided,” says Doug Shadel, Ph.D., lead researcher for the AARP Fraud Watch Network. “Meanwhile, today’s sophisticated technology makes it significantly easier for scammers to reach large numbers of investors.”
The Fraud Watch Network survey, conducted in August and September 2016, included interviews with more than 200 known victims of investment fraud and 800 interviews with members of the general investing public.
According to Shadel, “what emerges from this study is a well-rounded profile of the kinds of mindsets, behaviors and demographic characteristics that are correlated to falling prey to investment fraud.”
As advisors, you should be on the lookout for clients who match these descriptions and help educate them on the most common scams that could come their way.
The financial fraud universe
The world of financial abuse and identify theft is a vast one. Sometimes the thieves manufacture alluring Ponzi schemes. Other popular scams involve fake IRS phone calls, emails from oversees ‘royalty,’ or tactics that are closer to home — an appeal on behalf of a family member with an eye on their loved one’s nest egg.
The amount of thievery taking place in America varies as well. Many studies estimate the money lost to elder financial abuse alone at $2.9 billion. A 2016 study by True Link Financial, a San Francisco-based company that provides tools and services for seniors, and adults with disabilities, found that number to be a gross understatement.
According to AARP, today’s sophisticated technology makes it easier for scammers to reach large numbers of investors. (Photo: iStock)
The True Link Financial research revealed that seniors lose $36.5 billion each year to elder financial abuse with approximately 37 percent of seniors affected by financial abuse in any five-year period. A breakdown of the problem:
- Financial exploitation: $17 billion is lost annually to financial exploitation, defined as when misleading or confusing language is used — often combined with social pressure and tactics that take advantage of cognitive decline and memory loss — to obtain a senior’s consent to take his or her money.
- Criminal fraud: $13 billion is lost annually to explicitly illegal activity, such as the grandparent scam, the Nigerian prince phishing scam, or identity theft.
- Caregiver abuse: Nearly $7 billion is lost annually to deceit or theft enabled by a trusting relationship — typically a family member but sometimes a paid helper, friend, lawyer, accountant or financial manager
A perfect storm for fraud
AARP’s survey notes that economic forces have converged to make the current environment ideal for investment swindlers to practice their craft.
“The decline in traditional pensions has prompted millions of relatively inexperienced Americans to take on the job of investing their own money in a fast-moving and complex market,” says Shadel. “Meanwhile, today’s sophisticated technology makes it significantly easier for scammers to reach large numbers of investors.”