Senior Investment Scams

The golden years should be a time of relaxation and enjoyment, not financial stress and worry. Yet, increasingly, seniors find themselves targeted by sophisticated investment scams that threaten their hard-earned savings. Why are older adults particularly vulnerable, and how can they - and their loved ones - fight back against these predatory practices?

Investment scams targeting seniors often promise high returns with little to no risk. These offers can be tempting, especially for retirees living on fixed incomes who worry about outliving their savings. But as the adage goes, if it sounds too good to be true, it probably is.

According to the FBI, scams targeting those aged 60 and older caused over $3.4 billion in losses annually with an average loss of $33,915. This staggering figure underscores the urgent need for awareness and prevention.

The Anatomy of a Scam

One common tactic involves promises of guaranteed high returns. Scammers might claim insider knowledge of a "sure thing" investment, often in exotic-sounding ventures or emerging technologies.

Take, for example, the case of a recent cryptocurrency scam that specifically targeted retirees. Promising returns of 8% per month, the scammers used sophisticated websites and glossy brochures to lend credibility to their scheme. By the time authorities shut it down, hundreds of seniors had lost their life savings.

Another hallmark of these scams is the creation of false urgency. Fraudsters often insist that the opportunity is time-sensitive, pressuring seniors to make quick decisions without proper due diligence.

"You must invest now, or you'll miss out!" is a common refrain. This pressure tactic bypasses rational thinking and appeals directly to emotions - fear of missing out, in this case.

Scammers targeting seniors frequently employ sophisticated psychological tactics. They may:

• Appeal to a senior's desire to leave a legacy for their family.
• Exploit fears about the rising cost of healthcare.
• Use technical jargon to confuse and impress.
• Build false relationships, presenting themselves as trusted advisors.

Understanding these tactics is the first step in building a solid defense against them.

Recognizing Potential Elder Scams

So, how can seniors protect themselves from these increasingly sophisticated scams?

When you or a loved one is presented with any investment opportunity, take a step back. Give yourself time to think it over, consult with trusted family members or financial advisors, and conduct thorough research. When financial decisions are made alone, there's a greater chance of manipulation.

Before investing in anything:

• Check the credentials of the person offering the investment. Are they registered with the SEC or your state securities regulator?
• Research the investment itself. Is it registered? What do independent sources say about it?
• Be wary of unsolicited offers, especially those that come through cold calls or emails.

But what if a family member has already fallen for a scam and doesn't realize it? Many scams aren't a single event but an ongoing pattern of "investments" and losses that victims are manipulated into believing bring them closer to a massive, life-changing windfall. In that case, setting up safeguards like dual controls on accounts or designating a trusted contact person with your loved one's financial institutions. But this step is easier said than done.

Kevin's Story

Consider the situation of Kevin, a 54-year-old professional whose father was being manipulated out of thousands of dollars through investment scams. His father, a retired and widowed physician, was being victimized into making "investments" through a scam that originated with a phone call to his home's landline.

Once Kevin learned of the scam, he discussed the situation with his father. He clarified that he was clearly being taken advantage of, and there was zero chance of recovering his losses or making any money. But his father continued to engage with and make even more "investments" with the scammer.

Working with his father's bank, he was designated as a trusted contact on his accounts. He was to be contacted in the event of any unusual activity. Shortly after that, a team member at the bank called him to say that his father was trying to send a bank transfer of more than $100,000 to an account outside of the United States. Thanks to the diligence of a single teller, a tremendous financial loss was prevented.

After this event, Kevin worked with his brothers and sisters and eventually gained full control over his father's accounts. During this time, his father also moved into an assisted living facility with the monthly payments managed by Kevin. His father's access to cash was limited to a small amount of money in a checking account replenished weekly for everyday spending. One would expect all of these changes would be enough to prevent his father from being scammed, but it was not. Kevin later received a call from his father's bank - he had $2,000 in cash that we wanted to wire abroad. Keven's father had been withdrawing his weekly allowance from an ATM and saving the cash.

Kevin's story illustrates the challenges faced by those trying to stop elder financial abuse. As we mentioned above, helping someone out of an exploitative situation is sometimes easier said than done. In his case, it took a team of people - family, bank staff, and attorneys - to eventually gain control over the situation.

How Loved Ones Can Help

Family members are crucial in protecting seniors from investment scams - ideally, before they result in losses. Here's how you can help:

• Stay involved in your older relatives' financial lives while respecting their autonomy.
• Be alert for signs of unusual financial activity or sudden changes in financial behavior.
• Encourage open conversations about money and investments within the family.
• Help set up and maintain strong digital security measures, like password managers and two-factor authentication.
• Discuss options with the potential victim's financial institution if there's a suspected issue.

Many families don't have open conversations about money, and starting a dialog with an elderly parent about money can be difficult. For example, someone who's never shared their financial details with their kids may react defensively. But if financial abuse is suspected, proactive action is critical - even if the conversation is awkward.

The Takeaway

Staying informed, maintaining a healthy skepticism, and fostering open communication with trusted advisors and family members are your best defenses against these threats - against you or a loved one.

Seek the help of a qualified professional, such as an attorney familiar with these issues, if you have doubts or uncertainty about how to handle suspected financial abuse.