Top 7 financial scams: warn and educate clients before it’s too late

Fraud remains a pressing issue, threatening clients’ retirement savings and long-term financial security. In 2022, consumers reported nearly $8.8 billion lost to scams, marking a more than 30% increase compared to the previous year.1

Expanding digital channels have enabled scammers to diversify their tactics. Voice calls, text messaging, mail, and social media platforms are among the tools used to defraud victims. 

While older adults may have long been targets, the Federal Trade Commission reports that younger generations were actually more likely than older ones to lose money to certain types of fraud in 2021 — especially due to scams involving online shopping, fake cryptocurrency investment schemes and job scams.2

It's essential to educate clients of all ages on prevalent scams to help them safeguard their hard-earned retirement savings.

1. IRS impersonation and tax-related scams

How the scam works: According to the Internal Revenue Service, thousands of people have lost millions of dollars — and become victims of identity theft — as a result of scams targeting taxpayers.3

Scammers impersonating IRS officials may contact your clients through phone calls or emails, making aggressive claims that back taxes or penalties are owed due to new healthcare laws, or more recently, claiming targets are owed unclaimed refunds. They may intimidate individuals with threats of arrest or hefty fines and demand immediate payment through various means such as wire transfers or credit cards. In refund scams, they’re often looking to coerce victims into revealing Social Security numbers to steal their identities.

How you can help: Make sure clients understand that the IRS will never initiate contact through phone calls, emails or social media; nor will they threaten individuals with incarceration or use other high-pressure tactics. Any legitimate IRS dispute provides opportunities for appeal or verification.

2. Medicare fraud

How the scam works: Medicare fraud targets seniors, as every U.S. citizen over 65 qualifies for this important healthcare coverage. Fraudsters employ various tactics, including emails, phone calls, or even in-person visits, posing as Medicare representatives to extract personal information or money from seniors.

How you can help: Advise clients never to share their Social Security numbers to obtain new insurance cards, or pay fees for new supplemental policies or compliance with new healthcare regulations. They should only provide Medicare cards and numbers at approved healthcare facilities during service provision.

3. Investment/timeshare schemes

How the scam works: Timeshare schemes often lure individuals through free seminars or luncheons, followed by high-pressure sales pitches. Clients may find themselves wanting to resell soon after purchase, opening up opportunities for further fraud. Scammers may request money for advertising or title searches under the pretext of aiding the resale, only to disappear after payment.

How you can help: Encourage clients to consult with you before making significant purchases like timeshares, and to be wary of high-pressure sales tactics for any major purchase. If a client wishes to sell a timeshare, recommend working directly with the resort and ensuring sales commissions are paid only upon completion of the sale.

4. Phishing scams

How the scams work: Phishing scams target millions annually via email, websites, social media and text messaging. Thieves entice users to click on malicious links or visit counterfeit websites mimicking reputable companies, where users are tricked into entering personal information.

How you can help: Educate clients so they can identify phishing scams by looking for unexpected email attachments, requests for account information updates, inconsistent URLs or poor grammar in digital correspondence.

Spoof calls: tools of the trade for scammers

Whether they’re posing as government officials, charities, tech support or even friends or family  in need of help, fraudsters often use caller ID spoofing to make their calls appear to be local or from a trusted source. Advise clients not to answer or return calls from unknown numbers, to hang up on suspicious callers and to avoid disclosing personal information over the phone.

5. Romance scams

How the scams work: Romance scams, sometimes referred to as “catfishing” schemes, continue to pose a significant risk, especially as online dating becomes more prevalent. Scammers create false identities or dating site profiles to establish romantic relationships with their targets, gaining their trust and affection. Over time, they concoct elaborate stories to solicit money, often under the guise of a family crisis or wanting to meet in person. Widowed clients may be particularly vulnerable to these scams.

How you can help: Advise clients to verify the identities of individuals they meet online and to be wary of appeals for money, even if the requester claims to be in a romantic relationship with them.

6. AI investment scams

How the scams work: Artificial Intelligence (AI) is being exploited by scammers to deceive victims and to lure investors into fraudulent schemes. Along with scammers using generative AI to create “deepfake” video, audio or images to clone voices or identities, the recent hype around predictive AI is also used to trick would-be investors into fast-money schemes, often involving cryptocurrency.

In the first half of 2023, 53% of the $658 million lost to fraudsters using social media went to investment scams, with much of the money paid out in cryptocurrency.4 Compared to 2021, when victims reportedly lost $680 million, crypto fraud is on the rise.5

How you can help: Investors should be cautious of platforms claiming to use AI to generate returns and should be particularly cautious with those promoting investments on online platforms and social media channels. Any investment opportunity that requires recruiting new investors or that promises high returns with low risk should be treated with suspicion.

7. Lottery or prize scams

How the scams work: Lottery scams prey on a desire for fast financial gains. Whether the fraudsters contact victims via email, phone, mail or other means, they operate under the premise that the victim has won a prize, lottery or sweepstakes they don’t recall entering. Scammers typically ask victims to “verify” their personal identities — even including bank account details.

How you can help clients: Inform clients about the prevalence of lottery or prize scams where they’re told they’ve won, but need to pay fees or provide account information to claim the winnings. Advise them never to provide financial or personal information over the phone or email to claim such prizes.

With personal data stored in the cloud and information shared online through social networks, criminals are likely to continue evolving their methods for defrauding victims. When you connect with clients, be sure to talk about the dangers and increasingly deceptive tactics of cybercriminals and fraudsters to help them protect their hard-earning savings and avoid compromising their future financial security.

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