Senior Risk-Taking Investors Are Fraud Targets
Compared to investors overall, victims of financial fraud are more likely to be older, take more risks, be more focused on building wealth, invest frequently and receive more sales pitches, according to recent research from AARP.
Men 70 years or older are susceptible to investment fraud but other factors are at play as well, Doug Shadel, the study’s coauthor and the state director for AARP Washington, says on the group’s website.
Conducted this summer, a survey of 1,028 investors — of which 214 were victims — aimed to identify the psychological, behavioral and demographic characteristics of investment fraud victims, AARP says on its website. It found that victims typically value wealth accumulation more than the general investor public: 68% of victims believe acquiring money is one of their most important achievements, compared to 41% of general investors.
Victims are also more likely to take bigger risks: 48% believe that unregulated investments often offer the best returns, compared to 30% of general investors, according to the survey.
Fraud victims are also typically more active with their investments, as 42% of them make five or more investment decisions each year, while only 11% of general investors do so. Finally, 58% of victims received at least one investment pitch phone call a month, compared to 32% of general investors.
Exhibiting these traits doesn’t necessarily turn people into victims, Shadel says on AARP’s website. But the more of these characteristics investors possess, the more likely they are to be targets, he says.
Regulators have been stepping up efforts to protect seniors from financial fraud. Earlier this month, several senators reintroduced a bill designed to protect financial firms from legal liability when reporting suspected financial abuse of senior clients.
Two years ago, Finra and the North American Securities Administrators Association proposed similar initiatives. The House of Representatives already approved a similar bill this summer. And this fall, Finra asked SEC’s approval to require financial companies to attempt to find contact information for trusted people on accounts held by seniors.