Two basic strategies can help seniors and their families lessen the chances of becoming a victim of investment fraud. One is to Practice Self Defense by following five simple steps.

A second strategy involves a broader and more specific approach. Below, the section How Family, Friends, Caregivers, and Investment Professionals Can Help provides questions and checklists that can help protect senior investors.

 Taken together, they could go a long way toward helping investors avoid the devastating effects of      financial fraud.

 First, Practice Self Defense

 Don't be a courtesy victim. Older generations were taught to be courteous at all times, whether guests  visit them in person or contact them by phone. Con artists often take advantage of these overly  accommodating seniors, exploiting their good manners to get at their money. Remember, strangers who  call and ask for your money should be regarded with the utmost caution. The best response is to hang  up the phone.

 Verify, then trust. Trusting strangers is a mistake that many seniors make when it comes to their  personal finances. Don’t feel pressured by someone who asks you to make an immediate decision, giving you no chance to check out the salesperson, firm, and the investment opportunity itself. Instead, get written information about the investment, review it carefully, and make sure that you understand all the risks involved before you part with your hard-earned money.

A favorite tactic of telemarketing con artists is to develop false bonds of friendship. They know that some senior citizens are eager to have someone to talk to on the phone, even if the caller is a complete stranger. When a telemarketer phones, do not be swayed by offers of unrelated advice and assistance—they are merely efforts to develop a sense of friendship and even dependency for one purpose only: to win your confidence and take your money. 

Also keep in mind that almost all investment products must be registered. The Texas State Securities Board can tell you if the investment and the salesperson is registered.  Extensive background information on registered individuals and firms is available for securities dealers and agents and for investment advisers.

Never judge a person's integrity by how they sound. Senior citizens who fall prey to a con artist often explain that the swindler sounded like such a nice person. Successful con artists sound professional and are able to make even the flimsiest investment deals sound as safe as putting money in the bank. They combine these sales pitches with extremely polite manners, knowing that many older people may equate good manners with personal integrity. No matter how caring or well-meaning a person sounds, it has no bearing on the soundness of an investment opportunity.

Watch out for salespeople who prey on your fears. Con artists play on older people’s concern that they will either outlive their savings or see all of their financial resources vanish overnight as the result of a catastrophic event, such as a costly hospitalization. Playing on these fears of running out of money, swindlers often pitch schemes as a way for the elderly to build up their life savings to allay fears of running out of money.  Remember, though, that fear, like greed, can cloud people's good judgment and lead them into a terrible investment.

Don’t let embarrassment or fear keep you from reporting fraud or abuse. Some senior citizens fail to report that they have been victimized for fear that they will be judged incapable of handling their own affairs. Other seniors believe that their victimization will be viewed as grounds for forced institutionalization in a nursing home or other facility.  Con artists count on these sensitivities to prevent or delay the elderly from reporting the scam to authorities. Money lost to investment fraud is rarely recovered, and if it is, the amount returned is likely to be pennies on the dollar. 

How Investment Professionals, Family, Friends, and Caregivers Can Help

When Diminished Capacity Is Suspected, What Questions Should Be Asked?
  • Who manages your money day to day? How is that going?
  • Do you run out of money at the end of the month?
  • Do you regret or worry about financial decisions you’ve recently made?
  • Have you given power of attorney to another person?
  • Do you have a will? Has anyone asked you to change it?
Financial Concerns Checklist

Are you having any of the following common concerns?

  • I have trouble paying bills because the bills are confusing to me.
  • I don’t feel confident making big financial decisions alone.
  • I don’t understand financial decisions that someone else is making for me.
  • I give loans or gifts that I cannot afford.
  • My children or others are pressuring me to give them money or change my will.
  • People are calling or mailing me asking for money.
  • Someone is accessing my accounts or money seems to be disappearing.
  • Friends or acquaintances, like people I meet at church, want me to change my investment plans.
Dealing With a Third Party

A new person may enter a client's life, claiming to be a friend or having some close relationship with the client. Sometimes these parties may seem overly interested in the client's finances, leading to a tough conversation about the client's best interests. Suggestions for dealing with third parties include:

  • Use non-confrontational demeanor.
  • Ask about relationship to the client.
  • Discuss client’s daily activities and routines.
  • Discuss any of client’s special needs
Watch for the following behaviors from investment advisers and agents:
  • Demeaning comments about the client
  • Defensive, suspicious attitude
  • Hostility about your inquiries
  • Threat to change advisers on behalf of the client

To report suspected financial fraud, contact the Texas State Securities Board.  Individuals can also File a Complaint with the State Securities Board.