A study released by the NASD Investor Education Foundation, in cooperation with AARP Foundation and WISE Senior Services, looks at why certain senior investors are more likely to become victims of investment fraud. The report is called “Off the Hook Again: Understanding Why the Elderly Are Victimized by Economic Fraud Crimes.”
Among the key findings:
*Investment fraud victims tend to be more financially literate than non-victims.
*Investment fraud perpetrators use different tactics to influence and defraud their senior targets. Tactics include fear, friendship, and intimidation.
*Fraud pitches are customized to match the victim’s psychological needs. Pitches can include sales pitches.
*Investment fraud victims usually rely on their own experience to make investment decisions. They also tend to be more positive about the future, even though they’ve usually experienced more life difficulties than non-victims.
*Investment fraud experiences often go unreported.
Researchers examined undercover tapes of fraud pitches. They also surveyed non-victims and victims to figure out what makes them different. The findings are being used to develop practical messages that will help increase fraud awareness.
The report is recommending increasing fraud prevention programs and financial literacy programs to include information about the effectiveness of persuasion tactics. The report is also recommending that seniors be encouraged to report investment fraud crimes to securities regulators. More research testing the effectiveness of persuasion education and further study of the resistance to persuasion are also being recommended.
Statistically, nearly 1/3 of all U.S. investors are senior investors. Senior investors are investors between the ages of 50 and 64. Approximately 5 million senior investors are the victims of investment fraud every year. Americans born between 1946 and 1964 are known as the baby boomer generation, and they have over $8.5 trillion in assets available to invest.
Related Web Resources:
Remarks by Mary L. Schapiro Vice Chairman, NASD President, Regulatory Policy & Oversight, SEC Seniors Summit
States, SEC Work to Protect Elderly Investors, Senior Journal.com, July 12, 2006
NASD Investor Information