Anyone can unknowingly become the victim of investment fraud or targeted by insidious scam artists. Scammers are able to access and buy contact information for potential targets, which is then used to call and badger their victims. Be aware of some of the current scams and schemes and make efforts to stay safe and protect your money.
Some common types of fraud include these scams:
- Phantom windfalls. Phantom windfalls are alluring offers of huge payouts that never happen. These scammers use lofty promises that appeal to the victim's dream of being wealthy.
- False credibility. Some scammers use false credibility to gain favor among their intended victim. For instance, they lie about their credentials, colleagues, or position in life to earn their victims' trust.
- Consensus coercion. Consensus coercion basically makes the victim feel that everyone they know is investing in this opportunity, and they would be a fool not to join the ranks of their friends, neighbors, or others by investing money.
- Reciprocity tactics. When a scammer uses reciprocity tactics, they are asking for a favor- usually money- and will do a larger favor for their target.
- False sense of urgency. The scammer urges the victim to hurry-up and invest or buy, making it seem like an opportunity with a limited shelf-life. They put a lot of pressure on in an effort to get the victim to act quickly.
Some ways to avoid being defrauded include:
- End the conversation quickly. Practice saying 'no' and work on ending conversations. This takes the pressure off and gives the person being targeted a basic script to confidently end the call quickly.
- Ask a lot of questions. Take command of the conversation and ask a lot of questions, including whether the firm is registered with a state securities regulator. Don't give out personal information until you are satisfied that this is a legitimate company that is registered with the SEC (Securities and Exchange Commission).
- Be skeptical. Be especially skeptical of offers that ask you to keep quiet about the investment. Inform the solicitor that you will be discussing the information with your family or financial professional first. Anyone who discourages you from talking with others should raise an alarm that it might be wise to not invest.
- Remove your name from solicitations. Another way to curb the potential of being defrauded is to have your name and contact information removed from solicitation lists, such as junk mail lists and telemarketers. This requires visiting government websites to have your information taken off these lists, which tap into your online activity, public records, and other sources.
If you or someone you care for has been the victim of fraud, be sure to report the incident to your state securities regulator, which can likely be found via the internet. Use this information to identify when an investment opportunity is too good to be true and is likely a scam. Be inquisitive and skeptical of such opportunities, and ask for your name to be removed from call-lists to avoid future contact from scammers.