Top 6 Investor Scams to Warn Clients About

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Fraud continues to be a major problem, especially for older Americans. More than 791,000 complaints were filed with the FBI Internet Crime Complaint Center in 2020, and more than one-quarter (28%) of victims were over age 60. Seniors, in particular, lost approximately $1 billion.1 

Criminals are becoming increasingly cunning and resourceful in the ways in which they defraud individuals. While phone and mail continue to be used as outlets for criminal activities, online schemes have swept the globe, allowing criminals to target thousands or millions of individuals with the click of a button.

Even the most leery individuals could fall prey. Take time to talk with your clients about the top potential risks of fraud and help them avoid the devastating consequences that could threaten a lifetime of retirement savings.

1. IRS Impersonation Fraud

When someone pretending to be from the IRS calls or emails your client, claiming that back taxes are owed or that a new provision in the healthcare laws has resulted in additional penalties, it can strike fear. Some scammers threaten arrest or exorbitant fines if individuals don’t comply. Payment is often requested immediately via wire transfer, credit card, direct deposit, or other means.

Inform your clients that the IRS will never initiate contact via phone calls, emails or social media, and that individuals will never be threatened with jail time. The IRS also will never request financial information such as debit card or bank account numbers over the phone. If there is a legitimate IRS dispute, your clients will have opportunities to make an appeal or confirm the information, and not be subjected to pressure tactics to respond immediately.

2. Medicare Fraud

Scammers are prone to target Medicare and its recipients because the criminals aren’t required to research multiple healthcare plans to understand its inner workings, just one. And because every U.S. citizen over age 65 automatically qualifies, fraudsters can easily determine who their next victims should be. These swindlers will use many tactics to rip off seniors — from emails and phone calls to showing up at an individual’s door posing as a Medicare representative.

Clients should not respond to requests to divulge their Social Security number to obtain a new insurance card, nor should they pay fees to obtain new supplemental policies or comply with new healthcare regulations. Medicare cards and numbers should only be disclosed at the time of service at a healthcare facility or other approved provider

Mailers claiming that Medicare will cover a medical device should be thrown in the trash where they belong. If someone calls or shows up at your client’s door, encourage them to hang up, or shut the door.

3. Investment/Timeshare Schemes

Timeshares may result in double trouble for investors. Initially, a client may be sold timeshares under high-pressure sales presentations after being lured in by a free seminar or luncheon. Often, they regret their decisions soon afterward and look for ways to resell, opening opportunities for even more fraud. Under the guise of helping the investor sell a timeshare, swindlers might request money for advertising, title searches or other administrative fees. Some even make promises to guarantee a sale within 90 days, but disappear after they’ve made their money.

As an advisor, encourage clients to consult with you about any larger purchases, including timeshares, to help assess their legitimacy. Remind clients that anytime they feel pressured to make a decision quickly, it should serve as a red flag. If your client already owns a timeshare and wishes to sell, they should work directly with the resort when possible, and ensure that any sales commissions are paid only once a sale is made and not a moment before. Clients should also hang up on any phone pitches promising to pay a large amount to rent their timeshares during their week in exchange for an upfront finder’s fee.

4. Phishing Scams

Millions of people are the target of phishing scams each year through email, websites and social media private messages. Hackers may try to get unsuspecting users to click on suspicious links to lock them out of accounts in exchange for payment to restore service. Other scams direct people to a fake website that mimics a reputable company with which a person does business in order to get them to enter password information. Once they do, hackers can gain access to personal information associated with the real account such as credit card numbers, bank routing numbers, birth dates and more.

Help clients understand the dangers associated with phishing scams and to be on the lookout for digital correspondence issuing fake invoices or contest winnings. They should also be wary of unexpected attachments, requests to update account information and inconsistent urls or poor grammar. These are sure clues that something is “phishy.”

5. Phone Scams

Remind clients that phone scams, like many of those noted here, may involve caller ID spoofing. Criminals can make a phone number appear as though it is a local call, or make the name of a trusted organization appear on caller IDs. In general, advise clients to not answer or return calls from unknown numbers — if it’s legitimate, the caller will leave a voice message. And follow the principles of not disclosing personal information over the phone.

6. Romance Scams

An increasingly pervasive scheme involves tugging at a person’s heartstrings to gain control of their purse strings. Romance scams often involve online dating apps or social networking sites where scammers try to make an emotional connection before trying to trick someone into sending money. In fact, people reported losing more money to romance scams than on any other fraud type for the last three years running.2 

Losses to romance scams in 2020 topped $300 million, up by about 50% from the previous year. People aged 70 and older reported the highest losses from romance scams averaging nearly $9,500 each, and those ages 40–69 were the most likely to lose money overall.2 

A client’s love life is certainly a sensitive topic, but it’s crucial to remind them that they should never send money or gifts to someone they haven’t met. And doing an online search to find out whether the other person or their image is associated with complaints or other profiles may be helpful. Most of all, encourage clients to take it slow and protect their assets.

As more and more personal information of your clients is stored in the Cloud and shared online through social networks, a growing number of criminals may emerge who want to access it. The next time you connect with a client, talk about the dangers and highly deceptive tactics of today’s cybercriminals and fraudsters to help them protect their hard-earning savings and avoid compromising their futures.

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