How to Spot the 5 Persuasion Tactics Used in Investment Fraud
Investment fraud criminals use a wide array of sophisticated and highly effective tactics to get people to part with their money. Learn how to spot 5 persuasion tactics used in investment fraud with this video.
Up next in How to Invest Your Money (11 videos)
Learn about the stock market with these tutorials.
You Will Need
- Computer or telephone
- Skepticism
Steps
-
Step 1
Verify credentials
Don't assume a salesperson is legitimate just because they have a fancy title or a corner office with framed certificates; fraudsters hope that if they look successful, you won't bother checking their credentials. Investment professionals -- like brokers, investment advisers, and insurance agents -- must be registered with regulators, such as the Financial Industry Regulatory Authority, the Securities and Exchange Commission, or your state securities or insurance regulator.
-
You can verify a salesperson's credentials at "SaveAndInvest.org":http://www.saveandinvest.org/.
-
Step 2
Be wary of "phantom riches"
Be wary of an investment pitch that guarantees a certain return or promises spectacular profits -- what fraud-fighters call "phantom riches." No legitimate salesperson can make those kinds of promises. An ethical broker will admit that every investment involves risk.
-
Step 3
Ignore the "everyone is doing it" angle
Don't be swayed by a seller's claim that everyone from their mother to their mechanic is in on the deal. A pitch that focuses on who and how many people are invested, rather than why the investment is sound, should be viewed with skepticism.
-
Beware of "affinity fraud" -- investment scams that prey upon members of the same social circle, religious group, ethnic background, or other affiliation.
-
Step 4
Refuse to be rushed
Refuse to be rushed into anything. If the salesperson says it's a limited time offer, or that there's a limited supply of whatever's being peddled, consider it a red flag: the seller is attempting to make the investment look valuable by implying it's in scarce supply due to great demand.
-
Step 5
Never feel obligated
Never feel obligated to make an investment because the seller gives you something free; salespeople count on those freebies to guilt you into reciprocating.
-
Step 6
Arm yourself with information
Further educate yourself about fraud tactics so you can protect yourself and your loved ones. Go to "createthegood.org/fightfraud":http://createthegood.org/fightfraud to download the Outsmart Investment Fraud tool kit and order a free documentary -- because knowing how to recognize investment fraud red flags is the best way to avoid falling victim to them.
-
Investment fraud victims are more likely to be male, live with one or more people, be married, earn more than $30,000 per year, and have at least a college degree.
