The people most likely to get ripped off in an investment scheme are college-educated, married men who are financially literate and open to high-risk investments, according to SmartCheck.gov.
These men, aged 50 to 65, also belong to religious or professional groups. They have nest eggs. But for some reason, they are unlikely to check a broker’s background before investing — possibly because they’ve experienced a recent change in their health or their finances.
“The profile itself reaches back to the early 2000s,” says Dan Rutherford, office of customer education and outreach at the United States Commodity Futures Trading Commission, which runs SmartCheck.gov. “Investment fraud could affect anyone. We’re all at risk for fraud. Anybody could be taken.”
Investors who have experienced a difficult life change may be particularly vulnerable to fraudsters. “It could be separation or death of a spouse,” Rutherford says. “Fraud is about emotion. It’s not about smarts.”
And people who fall victim to investment fraud may do so again. “If we look at victims, roughly one-third are victimized again,” Rutherford says. “They may feel they have to go strong on their next investment to make up for the last one.”
A fraudster may even pose as a representative of a government agency helping them get their money back. Also, once an investor becomes a victim, their information is shared among thieves, making them the target of many other scams. “Once you get on one of those lists, you’ll tend to get more and more notifications,” Rutherford says.
Persistent cold callers selling investors may be fraudsters in disguise, too. “Over time, they tend to wear victims down,” Rutherford says. Binary options and precious metals are two big areas of investment fraud, Rutherford says. But those investors who buy binary options with a credit card also have recourse if they suspect a fraud.
“A lot of people are putting this on credit cards,” Rutherford says of binary options. “Have the credit card charged back to the processor.”
Here are some ways to spot an investment fraud scheme, according to SmartCheck.gov:
- The seller pressures or tries to rush you into a decision
- If the seller offers a “small favor” just for you if you invest
- The seller promises “phantom riches” or huge, unrealistic returns
- If the seller boasts about third-party endorsements, including people you may know to lure you into investing.
- The seller claims credibility they don’t have
SmartCheck.gov recommends checking the credentials of any broker or investment professional before you invest. “Most fraud is committed by brokers or firms that aren’t properly registered,” Rutherford says.
And with SmartCheck.gov, you can check whether a financial professional is registered or licensed with a government regulator or a self-regulatory organization and also check their disciplinary history anonymously. “Even just doing a basic Internet search can alert people to a fraudster,” Rutherford says. “The best advice is don’t invest in something you don’t know.”
Another big red flag of fraud is if a seller asks you to keep it a secret. Always get a second opinion.
“Take an opportunity to tell someone else,” Rutherford says. “We always recommend you talk to someone you trust, a spouse or an adult child.”
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