Financially intelligent people fall prey to investment fraud because fraudsters use persuasion techniques which are tailored to the victim’s psychological profile.
Watch for these warning signs.
1. Low risk investments with high returns
Any investment that looks too good to be true probably is. High returns are normally an indication that the investment is high risk.
2. Pressure to make a quick decision
Investing your money is a serious decision and should always be done with time and consideration. Scam artists do not want to give you enough time to figure out their game.
3. Insider information
If an investment adviser is giving out “confidential” investment advice, they may actually be deceiving you or their employer. Both put you at risk as it is illegal to knowingly trade on inside information.
4. Investment offers from complete strangers
If you are approached out of the blue by someone who you do not know offering an investment you know nothing about you significantly increase your risk of becoming a victim. If an investment is worth your money, your registered investment advisor will be aware of it or be able to help you decide whether to invest in it or not.
5. Anti-establishment
Any individual who encourages you to subvert the government or avoid financial institutions is most likely trying to keep their illegal activities from being tracked.
6. Exclusive offers for wealthy people
Be wary of investments that are allegedly intended for the super-rich but are being offered to the average investor.
7. Cutting out the paper trail
Without receipts for investment purchases, statements, a prospectus, or “know your client” forms, a scam artist can easily take your money without being detected and cannot be traced.
8. Overly complicated investments
Honest investment advisers are able to make investing your money simple and straightforward. You should always understand where your money is going and how it is being invested.
9. Avoiding the question
If the person selling you the investment does not answer your direct questions, they are probably trying to keep you from seeing the truth.
10. Beware the “halo” effect
Investors can be blinded by a “halo” effect when a con artist comes across as likeable or trustworthy. Credibility can be faked. Check out actual qualifications.
11. Everyone is buying it
Watch out for pitches that stress how “everyone is investing in this, so you should, too.” Think about whether you are interested in the product.
12. Pressure to send money immediately
Scam artists often tell their victims that this is a once-in-a-lifetime offer and it will be gone tomorrow. But resist the pressure to invest quickly and take the time you need to investigate before sending money.
