Think you're too smart to fall for a scam? That's just what the cons are counting on. According to a new AARP report, "Stolen Futures," Washington investors may be sitting ducks for con artists hawking bogus investment deals. The report dispels some common myths and stereotypes about who is most likely to be victimized, and why they fall prey to investment scams.To gain a better understanding of whom investment fraud victims are and why they are victimized, AARP surveyed a sample of investment fraud victims in Washington state and compared the results with other Washington investors. The survey revealed some surprising findings.
Washington investors overall flunked a standard battery of financial literacy questions, scoring just over 50 percent. However, victims of investment fraud actually scored higher than did non-victims. Investment fraud victims do not fit generally accepted stereotypes. They are more likely to be male, married, and employed. Victims of investment fraud were on average 55 years old. Victims of investment fraud are more likely to respond to persuasion and influence tactics typically used by con artists. According to AARP State Director Doug Shadel, the survey proves that one-size-fits-all investor education may not be enough. "Con artists are becoming increasingly sophisticated in tailoring their pitches to fit each individual victim," he said. "We need to become just as sophisticated in our approach to consumer protection."
AARP's effort to combat Investment Fraud is the first of its kind to incorporate information about persuasion and influence tactics with more traditional consumer protection information. "Teaching consumers about financial literacy without including persuasion tactics is like helping a poker player understand the difference between a straight and a flush without telling them anything about bluffing," says Shadel.
The persuasion tactics tested in the survey were identified in a related study by AARP and the FINRA Investor Education Foundation. The organizations analyzed hundreds of undercover audiotapes of con artists in action to pinpoint the most common tactics used in investment fraud pitches.
Those tactics included: Source Credibility (claiming to be from a well-known or legitimate business); Phantom Fixation (dangling the prospect of wealth and riches); Social Proof (showing examples of others who have invested and been successful); Scarcity (making an object sound scarce or rare to increase its perceived value); and Friendship (the con artist wants to change the relationship from salesman to friend).
You can sign up for the Fraud Watch Network at
www.aarp.org/fraudwatchnetwork or by calling 800-646-2283.
By joining the Fraud Watch Network, you'll receive alerts and notifications about new scams as they emerge.
File a consumer complaint with the Attorney General's Office at www.atg.wa.gov.