With Americans losing tens of billions of dollars annually to investment fraud schemes, what mindsets and behaviors are common among those who fall victim? A new survey by the AARP Fraud Watch Network finds that the most susceptible typically exhibit an unusually high degree of confidence in unregulated investments and tend to trade more actively than the general investor population. More of the investment scam victims also reported that they value wealth accumulation as a significant measure of success in life and acknowledged being open to unsolicited telephone and e-mail sales pitches.

Based on these findings, the AARP Fraud Watch Network has launched a campaign to warn consumers about the inclinations and activities common to investment fraud victims. The campaign includes an online quiz designed to prompt investors to consider adjusting their investment approach if results show they fit the profile of those most at risk of becoming a victim.

The AARP survey found stark differences between the past investment fraud victims and regular investors in three areas:

Psychological Mindset – More victims reported preferring unregulated investments, valuing wealth accumulation as a measure of success in life, being open to sales pitches, being willing to take risks, and describing themselves as ideologically conservative.

Behavioral Characteristics – Victims reported that they more frequently receive targeted phone calls and emails from brokers, they make five or more investment decisions each year, and more of them respond to remote sales pitches – those delivered via telephone, email or television commercials.

Demographics – Somewhat replicating the previous industry studies, higher percentages of victims were found to be of older age, male, married and military veterans.

According to U.S. Attorney Beth Drake, prosecuting dishonest brokers and investment advisors is a significant focus and unfortunately all too routine for the U.S. Attorney’s Office.

“There is a reason we all say that ‘If it sounds too good to be true, it probably is.’ You can and should protect your hard-earned money by determining if the broker or investment advisor is registered with the Securities and Exchange Commission before you place funds in the broker’s control. Go to www.investor.gov and do your due diligence before you invest your money.”

Attorney Drake added, “Con-artists – which is what a dishonest broker is – can be very convincing and will go to extraordinary lengths to support their scam and get your money. According to Attorney Drake, a typical case is where an advisor claims to be able to beat the market with specialized knowledge, instruments not generally accessible to the public or limited access. In U.S. v. Leben, the defendant claimed to have access to discounted securities that he could trade at face value, but instead, he pocketed most of the funds invested, and his victims lost over $2.3 million dollars. Then there was the Atlantic Bullion and Coin case, where the defendant claimed to be investing in a rising silver and gold market, and investors in the upstate lost millions.

Drake added these criminal prosecutions often end with jail sentences for the offenders, but unfortunately rarely does the criminal process result in full restitution of the invested funds to the victims.

“Most of the time, the scammers spend their ill-gotten gains on a lavish life style, which is all the more reason to do the due diligence in investigating the investment on the front end,” she said.

South Carolina Attorney General Alan Wilson adds, “I encourage all South Carolinians to remain vigilant in protecting their hard earned money. In order to work with South Carolinians, broker-dealers and their agents and investment advisers and their representatives, with very limited exceptions, must register with the Securities Division of the South Carolina Attorney General’s Office. If you are unsure whether the firm or individual you are dealing with is registered to do business in South Carolina and is in good standing, contact our office. It is always important to stay alert and be cautious when trusting someone with your investment. Don’t be afraid to ask questions and to reach out to our office. Visit www.scag.gov for more information.”

By taking the AARP Fraud Watch Network’s online quiz, investors can learn whether they possess the characteristics that may predict likely fraud victimization. Investors who score high on the quiz are urged to apply a new level of caution when they receive unsolicited investment overtures, and adhere to the following investor protection tips:

  • Do: Invest only with registered advisors and investments.
  • Don’t: Make an investment decision based solely on a TV ad, a telemarketing call or an email.
  • Do: Put yourself on the Do Not Call list.
  • Do: Get a telephone call blocking system to screen out potential scammers.
  • Do: Limit the amount of personal information you give to salespersons until you verify their credentials.
  • Don’t: Make an investment decision when you are under stress. For example, when you’ve recently experienced a stressful life event such as the loss of a job, an illness or death of a loved one.

The AARP Fraud Watch Network was launched in 2013 as a free resource for people of all ages. The website provides information about fraud and scams, prevention tips from experts, an interactive scam-tracking map, fun educational quizzes, and video presentations featuring Fraud Watch Network Ambassador Frank Abagnale. Users may sign up for “Watchdog Alert” emails that deliver breaking scam information, or call a free helpline at 877-908-3360 to speak with volunteers trained in fraud counseling.