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What Investment Fraud Victims Have in Common

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Are some people more susceptible to investment fraud than others?

The results of a survey of fraud victims released this week by AARP Fraud Watch Network shows that those who fall prey to fraud have certain behaviors and mindsets in common.

For one thing, survey participants reported that they preferred unregulated investments, valued wealth accumulation as a measure of success in life, were open to sales pitches and were willing to take risks, and described themselves as ideologically conservative.

In contrast to regular investors in the study, victims told researchers they more frequently received targeted phone calls and emails from brokers, made five or more investment decisions each year and were open to unsolicited telephone and email sales pitches.

The study also found that higher percentages of victims were older, male, married and military veterans.

The Fraud Watch Network survey, conducted in August and September, included interviews with more than 200 known victims of investment fraud and 800 interviews with members of the general investing public.

“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,” Doug Shadel, the network’s lead researcher, said in a statement.

AARP noted that the current environment was 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,” Shadel said. “Meanwhile, today’s sophisticated technology makes it significantly easier for scammers to reach large numbers of investors.”

AARP said that based on the survey findings, it has launched a campaign to warn consumers about the inclinations and activities common to investment fraud victims. 

The campaign includes an online quiz whereby investors can learn whether they have the characteristics that may predict likely fraud victimization.

AARP urged those who score high to be extra cautious when they receive unsolicited investment overtures, and adhere to these dos and don’ts:

  • Do:  Invest only with registered advisors and investments
  • Don’t:  Make an investment decision based solely on TV, telemarketing or email pitches
  • Do:  Put yourself on the Do Not Call list
  • Do:  Get a telephone call blocking system to screen out potential scammers
  • Do:  Limit the amount of personal information you give to unknown salespersons
  • Don’t:  Make an investment decision when you are under major stress

— Check out SEC Busts ‘Hamilton’ Ticket Resale Ponzi Scheme on ThinkAdvisor.


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