Emotions Make Older Investors More Vulnerable to Fraud, Says FINRA/Stanford/AARP Study

According to research, some financial fraudsters may try to manipulate investors by getting them to feel strong emotions so that they will hand over their money, and older investors are the ones who most vulnerable to this type of manipulation. Research was conducted and funded by the FINRA Investor Education Foundation, the AARP Fraud Watch Network, and Stanford University psychologists. They said that inducing certain emotions in older individuals may make them more likely to purchase items that were falsely advertised.

The team studied adults in the 65- 85 age group and adults in the 30-40 age group. They sought to find out whether inciting anger or excitement in either demographic made them more susceptible to fraud.

According to their findings, feeling excitement or anger enhanced an older investor’s desire to buy in investment item as opposed to when there was no emotional arousal. Furthermore, the emotional state felt by an older adult did not have to be positive or negative for him/her to become more vulnerable to fraud. As AARP Fraud Watch Network Dr. Shadel stated, whether a fraudster is trying to get an older investor excited about making a lot of money or angry about past or future financial losses, either approach, when used to get them to make a purchase, proved just as impactful. The elderly investor’s rational thinking becomes suspended in the process.

The research found that in younger adults, experiencing strong feelings of excitement or anger did not appear to be a factor in whether or not they would make a purchase. This suggests that heightened feelings do not increase the younger group’s susceptibility to fraud.

The findings also showed that while younger adults were more likely to buy when there was greater advertisement believability, this criteria did not impact older adults’ intention to make purchase. Instead, once again, an older person’s intention to buy was based more on experiencing strong feelings than on any perceived credibility.

Elder Financial Fraud
Unfortunately, senior investors remain a favorite target of fraudsters because they are more vulnerable to scams than younger investors. Older investors have more money saved. Some of them may suffer from dementia or are affected by the more typical changes that happen to the brain as people get older. Still others may be living in isolation, without a support system to help identify when there is fraud taking place. The Securities Industry and Financial Markets Association, seniors suffer $2.9B of losses every year to fraud.

Our senior financial fraud law firm represents older investors and their families seeking to recoup losses sustained from securities fraud. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Emotions Increase Susceptibility to Fraud in Older Adults: Research from Stanford, FINRA Foundation and AARP, FINRA, May 5, 2016

The Study