Alabama Securities Commission
I N V E S T O R E D U C A T I O N
I N V E S T O R T I P S
How Older Americans Can
Avoid Investment Fraud and Abuse
Older Americans are the number one target of investment con artists.
Additionally, stockholders and financial planners who engage in abusive
practices often seek out the elderly. The files of state securities agencies
are filled with tragic examples of senior citizens who have been cheated out of
savings, windfall insurance payments, and even the equity in their own homes.
Fortunately, such victimization can be avoided by following ten self-defense
tips developed for older Americans by the North American Securities
Administrators Association, Inc. (NASAA).
1. Don`t be a "courtesy victim." Older Americans are of the
generation that was taught to be courteous at all times to phone callers, as
well as people who visit them at home. Con artists will not hesitate to exploit
the good manners of a potential victim. Remember that a stranger who calls and
asks for your money is to be regarded with the utmost caution. You are under
absolutely no obligation to stay on the telephone with a stranger who wants
your money. In these circumstances, it is not impolite to explain that you are
not interested and hang up the phone. Save your good manners for friends and
family members, not swindlers!
2. Check out strangers touting "strange" deals. Trusting strangers
is a mistake that all to many older Americans make when it comes to their
personal finances. Say "no" to any investment professional or con
artists who presses you to make an immediate decision, giving you no
opportunity to check out the salesperson, firm and the investment opportunity
itself. Extensive background information on investment salespeople and firms is
available from the Central Registration Depository (CRD) files available from
your state securities agency. (For contact information, click on
"Securities Regulators" at the top of this page or call NASAA
toll-free at 202-737-0900.) Almost all investment opportunities must be
registered for sale in the state in which you live. Your state securities
agency can tell you if the investment opportunity is properly registered.
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 the risks involved. A favorite tactic of telemarketing con artists
is to develop a false bond of friendship with older Americans. Swindlers know
that many senior citizens are eager to have someone to talk to on the phone...
even a complete stranger. If you are dealing in person 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. If you are lonely and in need of companionship, don`t make the
mistake of seeking it from someone whose only real interest is to get his or
her hands on your money.
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 that you 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. All too many
older Americas who get wiped out by con artists later explain that the swindler
sounded like such a nice 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 Americans are likely to equate good manner with personal integrity.
Remember 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 older Americans worry they will either outlive their savings or see
all of their financial resources vanish overnight as the result of a
catastrophic event, such as a costly hospitalization. As a result, it is common
for swindlers and abusive salespeople to pitch the schemes as a way for older
Americans to build up their life savings to the point where such fears are no
longer necessary. Remember that fear and greed can cloud your good judgment and
leave you in a much worse financial posture. 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 of all major money decisions. As a
result, older women, particularly those who have received windfall insurance
payments in the wake of their spouse`s death, are prime targets for con
artists. Elderly women who are on their own and have little know-how about
handling money should always seek the advice of family members or a
disinterested professional before deciding what to do with their savings. One
excellent resource available nationwide is the Women`s Financial Information
Program at the American Association of Retired Persons (AARP). For more
information, write: "Women`s Financial Information Program," AARP
Consumer Affairs, 601 E Street, NW, Washington, DC 20049.
7. Monitor your investments and ask tough questions. Too many older
Americans not only trust unscrupulous investment professionals and outright con
artists to make initial financial decisions for them, but compound their error
by falling 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
keep you from demanding a routine statement of your savings. When you suspect
that something is amiss and get unsatisfactory explanations, call your state
securities agency and make a complaint.
8. Look for trouble retrieving your principal or cashing out profits.
Many older Americans have little ongoing need for investment funds, while
others require 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
profits, you have uncovered someone who wants to cheat you. Since unscrupulous
investment promoters pocket the funds of their victims and 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 your from reporting investment
fraud or abuse. Older Americans 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 senior
citizens 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 Americans 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 Americans who fear that
they have been victimized is the securities agency in the state in which they
live. (For contact information, click on "Securities Regulators" at
the top of this page or call NASAA at 202-737-0900.)
10. Beware of "reload" scams. Younger Americans 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.
Most older Americans, however, are dealing with a finite amount of money that
is unlikely to be replenished in the event of fraud and abuse. The result is a
panic that is well known to con artists, who have developed schemes to take a
"second bite" out of senior citizens who already have been
victimized. Faced with a loss of funds, some senior citizens will go along with
another scheme (allowing themselves to, in effect, be reloaded) in which the
con artists promise to make good on the original funds that where lost... and
possibly even generate new returns beyond those originally promised. Though the
desire here to make up lost financial ground in understandable, all too often
the result is that unwary senior citizens lose whatever savings they have left
in the wake of the initial scam and possibly more in the second scam.
The Director of the Alabama Securities Commission
(ASC) cautions potential investors to thoroughly check out any investment
opportunity. For inquiries regarding
securities dealers, to report suspected fraud, or obtain consumer information
email, call, or write the ASC.
Email: asc@asc.state.al.us
Call: 1-800-222-1253
Write: Alabama Securities Commission
770
Washington Ave., Suite 570
Montgomery, Alabama 36130-4700