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.

You will need

  • Computer or telephone
  • Skepticism

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.

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.

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 “”: 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.