Most retirees are familiar with the risks and gains of investments; some may have retired from wise investments. But not all investments are legitimate. Some carry greater risks than others and some are outright investment scams.
Investment scams are frequently geared towards seniors who are looking for a way to grow their retirement fund. And who among us wouldn’t love to add to our nest egg? Maybe even enough to allow us to travel more or buy a new condo.
Though many investments are sound, investment scams are often sprinkled in, making it challenging to determine which ones are a fraud.
And in recent years, investment scams geared towards seniors have been rising, with all the baby boomers hitting retirement age. But it isn’t just the rise in the baby boomers retiring that has increased the number of investment scams, current events also impact these scams.
Whenever there seems to be nationwide or global unrest, as seen with the 2020 COVID-19 pandemic, scams increase, especially those for investments (there are also COVID-19 related scams and IRS scams).
In 2020 investment scams cost seniors $18,570,772, and those 65+ lost the most compared to any other age group. The top five methods of contact for these scams from highest to lowest were:
- Social network
Though there is a multitude of scams out there, this list is the top five investment scams. Each of the investment scams below is broken down to show how the scam is set up, what the scam is, and how to avoid it.
Knowing how to identify and avoid investment scams is the main thing you can do to protect yourself from falling victim to these criminals. And when checking out investment opportunities, you can always use www.investor.gov to find out more about the investor.
- The Investment Coach
- The Gold Bar Scam
- Fake CDs
- Community Scams
- Insider Tip
The Investment Coach
The Scenario: You receive an ad for an investment seminar that promises to teach you how to get big returns on your investments. The ad may even focus on retirees saying something like, “Secure the retirement of your dreams.”
Regardless of whether the event is in-person or online, they all promise to teach you the skills you need to for low-risk, high-return investments. And all of the investment coach scams make claims that they offer a proven strategy and will show unverifiable social proof, like:
- “Answer to my prayers” – Susan
- “I can finally get out of debt” – Rob
- “Finally, an investment strategy that works!” – Greg
The Scam: The investment coach scam gets people to pay money upfront for the seminar, books, webinar, or online course. Some of these scams claim to be free, and often, they provide a teaser video with vague methods and big promises, but you need to buy the full course for you to learn more.
The scammers are fabulous actors and actresses knowing how to play to the audience and get people excited, which is how they get retirees to buy into their program.
Unfortunately, most of these scams will cost seniors thousands of dollars if they purchase the whole program.
How to Avoid It: The best way to avoid these scams is to identify them first, which can be pretty easy since most use similar advertising methods. Plus, all of these scams will make promises of huge returns on your investments.
Also, investment coach scams will always provide exagerated social proof.
Finally, the investment scammers will claim how simple it is to make money using their methods, often insisting the program is formatted in an easy to follow step-by-step plan.
If you are still interested in an investment coaching program, before paying a penny, take the time to research the person and their company. Also, look for third party review websites to get the real scoop.
The Gold Bar Scam
The Scenario: The gold bar scam can come in many forms, such as precious metals or rare coins. The scam artist is or will claim to be a rare coins merchant or metal dealer and will attempt to get you to buy, telling you it’s the best time to get into the market, often using pressure techniques to get you to act now.
The Scam: One of two things can happen after you hand over your money. You will find out that you paid inflated prices for something that is not near the value you were promised. Or after the scammer takes your money, you will never hear from them again and are left empty-handed.
How to Avoid It: First, before investing in precious metals or coins, do the homework on the company you will be working with and check the current value and trends of the item you are considering.
If you receive a cold call or unsolicited email offering you a great deal on precious metal investments or collector coins for sale, it is best to hang up or delete the communication. Legitimate, trustworthy dealers will not use cold calls, web page popups, or emails to draw people in.
The Scenario: During times of unrest when the economy is unsettled, it may seem that investing in a Certificate of Deposit (CD) is the best way to keep your money safe. However, you are not the only one thinking this way, which is why fake CD scams are so prevalent when things in the world are off.
In fact, when COVID-19 hit in 2020, there was a significant rise in scammers selling fake CDs.
The Scam: Fake CD scams can happen anytime. The most common fake CD scams are initiated through unsolicited contact, phone, email, or even an online pop-up message.
However, it needs to be noted that some of these scams are from websites that mimic a legitimate company. But, when looked at closely one will notice little things that are off, like a minor misspelling in the URL address. These are called spoofed websites.
How to Avoid It: One of the brightest red flags that it is a fake CD is that the company will claim significant returns with no early withdrawal fees. Another way to tell if it is a scam is that the company will only sell CDs and not offer any other financial services.
And never send money to companies that:
- Request payment sent to offshore accounts
- Have you pay money to a company
- Require high minimum investment amounts
Also, before signing up for any CD, take the time to read the contract in full and if you have a financial advisor, ask them to verfiy it out too.
The Scenario: Community scams target a specific group of people by age, religion, or ethnicity. These scams are also referred to as affinity scams.
The scammers will usually approach the leader of the community or insert themselves within the community, making those around them more comfortable.
The Scam: The scammers are wolves in sheep’s clothing; they pretend to be part of the community and offer investment services or use ponzi scams to steal money.
The primary reason these scams work so well is that the scammers use the community ties, trust, and feelings of comfort from others that similar to themselves, to get buy-in.
How to Avoid It: Community scams are one of the most difficult scams to detect. The scammers may plant themselves in a community for a while before approaching others or the organization’s leader with a great investment opportunity.
But before making any investment be sure to do the homework. Even if you feel like you can trust this person researching the investment is always wise before handing over any money.
Also, many affinity scams are ponzi scams. That structure is another way to identify a legitimate investment or a fraud.
The Scenario: This scam is also known as the pump and dump scam. The insider tip scammer sends out communication via mass email or posting a hot tip on an online board about the latest and greatest stock investment.
For the insider tip investment scam to work, the scam artist needs to reach the masses.
The Scam: These scams attempt to raise the value of specific stock owned by the scammer. The scammer gets as many people as possible to purchase this stock and will sell their shares as soon as they reach a specific rate. After dumping their stock, the value will drop, causing all those who invested later to lose out.
How to Avoid It: Buying stock is a common way for many to invest their money; however, before buying, take the time to talk to a trusted financial advisor. And as always, do the homework to learn more about the company before investing.
Never invest in stocks based on a tip you happen to find or receive through unsolicited communication or online board.
Take your time too. If the person uses high-pressure sales techniques, it is likely best to move on. Do not allow yourself to be badgered into investing.