October 22, 2010
Are you concerned about having enough money for your retirement? That could make you a prime target for investment fraud.
Financial abuse of older people is increasing as more seniors are being lured into investments that are unsuitable (inappropriate) or outright frauds.
According to recent articles in InvestmentNews and Bloomberg, one out of every five Americans older than 65 has been the victim of a financial scam. This means that more than 7.3 million seniors have been taken advantage of financially. The Canadian Anti-Fraud Centre reported that in 2009, people had lost $60 billion dollars to mass marketing fraud. One of the reasons for the trend is that although as we age, some of us experience some degree of cognitive difficulty.
What’s even worse is that some seniors suffer from social isolation as a result of illness, impaired mobility, and the breakdown of social networks due to death and relocation. These people are particularly vulnerable to solicitations that falsely intimate friendship and individualized concern.
Scam artists prey on the fear people have of coming up short in their later years by promising high-return, low-risk investments. In reality, these investments are usually high-risk products that are not right for people looking to protect their nest egg as they approach retirement—if the investment exists at all.
Here are two common ways scam artists approach people over 50 (With Information from the Securities Administrators of Canada):
Scammers often target pre-retirees through “free lunch” investment seminars. These seminars have become a popular way of promoting investments. The investments themselves may not be scams, but the sales tactics used at these seminars often raise concerns.
Some presenters are paid to promote specific investment strategies that offer high returns. Often these presenters offer up some high risk products that are inappropriate for older people. They might even urge you to invest on the spot.
You may be surprised at the number of people who can fall victim to scams and fraud. There have been many instances of fraud where the victim had been a high ranked business executive. It can even happen to very sharp and investment savvy people. Research shows that people with investing experience are more open to investment opportunities and are likelier to take risks. It also shows that experienced investors are more likely to make their own investment decisions, without getting advice from an independent financial adviser.
Exempt securities are sold by companies that are allowed to sell the securities without filing a prospectus. Although they are not necessarily scams they are a common con when it comes to investors over 50.
The scam usually starts when you get an unsolicited pitch to invest in a promising business that is about to offer shares to the public. Exempt securities are risky, and you could lose all of your investment.
Forex scams often find their victims through ads placed in newspapers or on Internet sites. The ads look legitimate and offer you an exciting opportunity to invest your money on the foreign exchange (forex) market. You’ll be told the person investing your money has a great track record and you’ll be promised a high return.