Financially Savvy More Likely to Fall for Scams - Are You Next?
AARP, DFI use new research findings to launch unique assault on investment fraud
SPOKANE -- Think you're too smart to fall for a scam? That's just what the cons are counting on. AARP and the Washington State Department of Financial Institutions (DFI) used groundbreaking new research findings this morning to launch a unique assault on investment fraud. More than 250 Spokane residents packed the Red Lion Hotel at the Park for the first in a statewide series of "Invest Wise Washington" investor education events. The campaign is the first of its kind in the nation to use detailed insights into the minds of con artists as a way to protect consumers.
Tacoma senior Dick Mansfield is sharing his story as part of the Invest Wise Washington campaign in hopes of protecting others. After spending years carefully planning and investing for his retirement, the teacher of over 31 years was confident he knew a good deal when he saw one. As it turns out, that's just what a con artist was hoping for.
Mansfield was among more than thirteen-hundred investors nationwide who lost a combined $60 to $100 million dollars in a bogus investment deal promising returns of over 48 percent per year. Mansfield alone lost over $175,000 to the scam. "The promise of such high returns should have set off all kinds of alarms, but our financial advisor was someone that I thought I could trust," said Mansfield. "Not only was he very persuasive, he had also been a teacher. He was like one of us - a friend."
Unfortunately, Mansfield's story isn't unique. 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.
"These criminals have no shortage of unscrupulous tactics designed to line their pockets with our hard-earned savings," said Scott Jarvis, Director of the Washington State Department of Financial Institutions. "Anyone of us could be the next financial target. However, we're tearing pages directly out of the con artist's playbook in an effort to better protect consumers."
To gain a better understanding of who 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%. 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 make more than $35,000 a year.
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."
The "Invest Wise Washington" campaign 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 Financial Industry Regulatory Authority (FINRA). The organizations analyzed hundreds of undercover audio tapes of con artists in action in order 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).
In addition to today's event, the AARP Fraud Fighter Call Center is reaching out to Spokane residents with investment fraud prevention tips. The call center plans on calling more than 2,000 Spokane area residents in the coming weeks.
AARP and DFI also kicked off a new television and radio ad campaign featuring the voice of a telemarketing fraud insider. The ads began to air in Spokane immediately following today's event, encouraging people to order a free copy of the "Invest Wise" tool kit.
For more information about the Invest Wise Washington campaign, and to order your free kit, visit www.dfi.wa.gov or call 1-877-RING-DFI. The kit includes an Invest Wise booklet, DVD and other helpful information on wise and safe investing.