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Prevention VI:  10 Self-defense Tips Against Investment Fraud



Fraud Prevention



 

Ten Self-defense tips against investment fraud:


I.  Don't be a "courtesy victim." Most individuals are taught to be courteous at all times to phone callers, as well as to people who visit them at home. Con artists will not hesitate to exploit the "good manners" of a potential victim. A stranger who calls and asks for your money should be regarded with the utmost caution. You are under no obligation to stay on the telephone with a stranger who wants your money. In these circumstances, it is not impolite to state that you are not interested and simply hang up the phone.

2.  Check out strangers as well as their touted "deals." Say "no" to any investment advisor or salesperson who presses you to make an immediate decision, preventing you from checking out the person as well as the investment.

Before you part with your hard-earned savings, get written information about the investment opportunity, review it carefully and make sure that you understand all of the risks involved.

A favourite tactic of telemarketing con artists is to develop a false bond of friendship with older people. If you are dealing personally with a stockbroker or financial planner, do not be swayed by offers of unrelated advice and assistance that are merely efforts to develop a sense of friendship and even dependency.

3.  Always stay in charge of your money. A stockbroker, financial planner or telemarketing con artist who wants your money will be more than happy to assure you that he or she can handle everything, thereby relieving you of the need to watch over and protect your nest egg. Beware of any financial professional who suggests putting your money into something you don't understand or who urges you to leave everything in his or her hands.

Constant vigilance is a necessary part of being an investor. If you understand little about the world of investments, take the time to educate yourself or involve a family member or a professional, such as your banker, before trusting a stranger who wants you to turn over your money and then sit back and wait for results.

4.  Never judge a person's integrity by how they "sound." Many older people who get wiped out by con artists later explain that the swindler "sounded like such a nice young man or woman." Successful con artists sound extremely professional and have the ability to make even the flimsiest investment deal sound as safe and sound as putting money in the bank. Some swindlers combine professional-sounding sales pitches with extremely polite manners, knowing that many older people are likely to equate good manners with personal integrity. Remember that the sound of a voice (particularly on the phone) has no bearing on the soundness of an investment opportunity.

5.  Watch out for salespeople who prey on your fears. Con artists know that many retirees worry that they will either outlive their savings or see all of their financial resources vanish overnight as the result of a catastrophic event. As a result, it is common for swindlers and abusive salespeople to pitch their schemes as a way for older people to build up their life savings to the point where such fears are no longer necessary. Remember that fear and greed can cloud your judgment and leave you in a much worse financial position. An investment that is right for you will make sense because you understand it and feel comfortable with the degree of risk involved.

6.  Exercise particular caution if you are an older woman with no experience handling money. Ask a con artist to describe his ideal victim and you are likely to hear the following two words: "elderly widow." Sadly, many women who are now in their retirement years often received little or no education in their youth about how to handle money. Women of this generation often relied on their husbands to handle most or all major money decisions. As a result, older women, and particularly those who have received windfall insurance payments in the wake of the death of a spouse, are prime targets for con artists. Elderly women who are on their own and have little know-how about handling money should seek the advice of family members or a disinterested professional before deciding what to do with their savings.

7.  Monitor your investments and ask tough questions.

Too many older people not only trust unscrupulous investment professionals and outright con artists to make financial decisions for them, but compound their error by failing to keep an eye on the progress of the investment. Insist on regular written and oral reports. Look for signs of excessive or unauthorized trading of your funds. Do not be swayed by assurances that such practices are routine or in your best interests. Do not permit a false sense of friendship or trust to keep you from demanding a return of your savings. When you suspect that something is amiss and get unsatisfactory explanations, call your provincial securities commission and make a complaint.

8.  Look for trouble when trying to retrieve your principal or cash out your profits. Many older people have little ongoing need for income from investments, while others need returns that are paid out regularly in order to supplement limited incomes. If a stockbroker, financial planner or other individual with whom you have invested stalls you when you want to pull out your principal or even just your profits, you may have uncovered someone who wants to cheat you. Since unscrupulous investment promoters pocket the funds of their victims, they often go to great lengths to explain why an investor's savings are not readily accessible. In many cases, they will pressure the investor to "roll over" non-existent "profits" into new and even more alluring investments, thus further delaying the point at which the fraud will be uncovered. If you are not investing in a vehicle with a fixed term, such as a bond, you should be able to receive your funds or profits within a reasonable amount of time.

9.  Don't let embarrassment or fear keep you from reporting investment fraud or abuse. Older people who fail to report that they have been victimized in financial schemes often hesitate out of embarrassment or the fear that they will be judged incapable of handling their own affairs. Some investors have indicated that they fear that their victimization will be viewed as grounds for forced institutionalization in a nursing home or other facility. Recognize that con artists know about such sensitivities and, in fact, count on these fears preventing or delaying the point at which authorities are notified of a scam. While it is true that most money lost to investment fraud is rarely recovered beyond pennies on the dollar, there are also many cases in which older people who recognize early on that they have been misled about an investment are then able to recover some or all of their funds by being a "squeaky wheel." A good resource for older people who fear that they have been victimized by a con artist is the securities agency in the province in which they live.

10.  Beware of "reload" scams. Younger people who are ripped off by swindlers are fortunate to the extent that they have the opportunity to pick themselves up and restore some or all of their losses through new earnings. However, most older people are dealing with a finite amount of money that is unlikely to be replenished in the event of fraud or abuse. The result is a panic that is well known to con artists, who have developed schemes to take a "second bite" out of older individuals who have already been victimized. Faced with a loss of funds, some elderly citizens will go along with another scheme (allowing themselves to be reloaded, in effect) in which the con artist promises to make good on the original funds that were lost ... and possibly even generate new returns beyond those originally promised. Though the desire here to make up lost financial ground is understandable, all too often the result is that the unwary senior citizens lose whatever savings they have left in the wake of the initial scam.


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