Scams are an unfortunate part of being a consumer today. Almost daily we hear stories about individuals being targeted in various schemes that wreak havoc on their hard-earned money. Financial scams in particular are so rampant in our society that the National Council on Aging calls them the “Crime of the 21st Century.” They also say that these scams “often go unreported or can be difficult to prosecute, so they’re considered a ‘low-risk’ crime. However, they’re devastating to many older adults and can leave them in a very vulnerable position with little time to recoup their losses.”
Sometimes scammers are bold and simply ring a doorbell, however their messages often come in the form of phone calls, email or even traditional mail. One of the best ways to arm yourself against these schemers is being aware of the most common tactics.
This scam generally involves Medicare recipients. The scammer typically identifies themselves as a representative from Medicare with the goal of getting older adults to give out personal information. Because every U.S. citizen or permanent resident over age 65 qualifies for Medicare, the scam artist generally does not need to research the private health insurance company of an older person in order to scam them out their hard-earned money.
Online scams are a common way older adults fall prey to financial scammers. Generally, seniors are not as familiar or comfortable with this type of technology and can be trusting of anyone who seems to have a bit of internet knowledge. Email scams, pop-up browsers or viruses are all ways that scammers try to rob older adults of online funds.
One of the most common internet techniques involves an email or phishing scam. Generally the victim will receive an email message that looks like it is from a legitimate organization. The email will ask the recipient to verify or update personal information such as social security numbers or tax information. Once this information is received by the scammer, the victim can be the target of identity theft and a multitude of other financially damaging situations.
Sweepstakes & Lottery Scams
These simple scams are all too familiar for many unknowing victims. They often come in the form of email or “snail mail” letters informing the reader that they have won a sweepstakes or lottery. In order to claim their prize they are either asked to disclose important personal information such as a social security number, or make a small payment. Once the payment is received, the recipient cashes in with little or no recourse on the part of the victim.
Grandchild sob story
This scam is one that makes us sick to our stomach, because it plays to the heart-strings and emotions of a loving grandparent. The scammer calls their victim posing as a grandchild. “Hi grandpa, do you know who this is?” Once the victim says “Susie?” or some other name, the con artist takes on that identity.
After winning the trust of grandma or grandpa, the scammer will share a sad story about a financial issue for which they need funds. After playing to the emotions of a worried grandparent, the con-artist asks the victim to send funds via Western Union or some other wire service that does not require identification, with a final plea not to divulge their current need to a parent for fear that they might worry.
This “financial scam” is, sadly, legal. It is also one “scam” with which we are all too familiar here at Financial Fiduciaries. The “scam” is generally pulled off by the very person with whom many investors are placing their financial futures. A financial planner who is not fee-only, is perhaps one of the biggest legal “scams” out there. While the investor/victim believes that this person has their best interest in mind, often the advice is given only because it will allow the planner to make the most money. The planner is not acting as a fiduciary, doing what is in the best interest of the client, but rather, they are helping themselves to a huge profit while the investor often will see little or no return on their financial suggestions. (For more info on this scam see our post below – “What your Financial Advisor DOESN’T Want You to Know” )
How-to Avoid Financial Scams
The best way to reduce the risk of becoming the next victim of financial abuse is by educating yourself. The following are tips to help you avoid these (and other) financial scams:
- Don’t react immediately to a phone call, letter or email. Take a moment to consider the offer and even wait and discuss it with someone who is trustworthy.
- Never send money to claim a prize. Any legitimate prize will be just that…a free prize.
- If you did not enter the contest, you did not win.
- If someone poses as a relative or other friend asking for money ask very specific questions that only that person would know…even if you think you are talking to the person they claim to be.
- Always research the organization that is being represented in an unsolicited call. Call them back to ensure that it is a legitimate organization/offer.
- Never give out personal information over the phone or internet. A reputable organization will understand if you want to provide this information in-person.
- When in doubt about your financial planner’s motives, contact a fee-only financial planner who does not earn a bonus based on their advice, or the products they sell.