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It's No Secret Why Elderly Are Scam Targets
By: George Chamberlin, North County Times
May 21, 2005
The National Association of Securities Dealers is spending $127,700 to fund a study on why the elderly are frequently the victims of financial fraud crimes.
I could have saved these guys a lot of money. The reason the elderly are targeted for investment scams is the same reason that Willie Sutton said he robbed banks: That's where the money is.
How much money is actually invested in fraudulent investments by seniors is impossible to calculate. Often these victims are unlikely to report that they have been scammed. The embarrassment of telling law enforcement officials ---- not to mention their family ---- that they have made an expensive blunder prevents them from coming forward.
This hesitancy, of course, is not ignored by the people who prey on the elderly.
That's why so-called "reload" scams are so successful. These cons seek out people who have been swindled by an investment adviser and say they will help recover the money ---- for a fee. This results in even bigger losses.
Many of today's older population are children of the Great Depression. It is understandable why they live in fear that something could happen that would destroy their life savings. As a result, they become very conservative. That creates a Catch-22 situation. Their money is tied up in low-yielding investment, but they need higher income to keep up with the cost of living.
This, of course, is not ignored by the people who prey on the elderly.
That's why scams that promise big returns with no risk prove to be just too tempting. More than 1,000 elderly people invested $56 million in a "prime bank" investment program that promised quarterly returns of 15 percent.
Their money is gone.
Most seniors believe that the money they have in the bank is absolutely safe and secure. However, that confidence can lead to big and expensive problems.
Government regulators are constantly reminding investors that money they put into mutual funds and variable annuities are not backed by the FDIC even though they may be purchased from a bank representative.
To be clear, these investments are not scams. But when they are recommended to seniors who cannot tolerate the risks or expenses involved, they are unethical. The lure of promised returns often leads seniors to put their money in unsuitable investments that generate big commissions for the agent and little in benefits for the investor.
Self-defense is the first line of protection from investment fraud. Before you write a check or give any money to an investment adviser it is critical that you check out the person's history. The security dealers association will provide a detailed report on legal complaints that have been brought against an adviser.
It is available by calling (800) 289-9999 or at www.nasdr.com.
And, don't even think about investing without thoroughly investigating the proposed product. You must know all risks and expenses before investing. And don't take a person's word. Get everything in writing.
Remember, it is your money and no one should be more protective about how it is invested than you.
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