How you can spot a con artist
Characteristic #1: They don't like to stand out.
Con artists know that being themselves hurts their business. Effective con artists must disguise their true motives therefore they take great pains to look, sound, and speak like you. Con artists like to blend in with others in your group, whether that group be political, community such as the local senior center religious, or other. They quickly get to know people in the group so that they can use the group to spread the word about their questionable investments and reel in unsuspecting investors.
#2: They dress for success.
Today, a variety of institutions, from banks to brokerage firms to financial planners offer a wide range of financial products. With such a confusing mix to choose from, its no wonder that many people turn to financial advisers for guidance. Con artists know this and stand ready to assume full responsibility for your investment decisions. Dont let them. When it comes to your money, think through all the options. Never give someone control of your purse strings just because you think you are too old, too young, or too financially inexperienced.
If you really need help, deal only with licensed investment advisers, broker-dealers, or financial institutions with proven track records. Click here to see if the person is licensed and if what theyre selling is registered.
Skilled con artists know how to prey upon your emotions. They'll infer that you won't have enough money for retirement or that the investments you have aren't earning enough. Con artists try to make you feel inadequate if you dont believe them. And they know how to make you believe that if you lack confidence in them, this is a personal slight to their abilities. If you find yourself making investment-related decisions based only on your emotions, watch out.Characteristic #5: They are fair-weather friends.
When you first meet, con artists are very friendly. They take a personal interest in you. They call back when they promised. Each time, they tell you even more good things about the investment.
In fact, the contacts may become so frequent that you may wish that your first contact had been your last. Too often, however, once you have invested your money, contact with the con artist dwindles and then stops altogether. Danger sign: Not hearing from the con artist, especially when you repeatedly try to contact them.Characteristic #6: They will tell you what you think you want to hear.
Every investment involves risk. But to hear the con artist explain it, the investment can't fail. Trust your inner voice when it tells you something sounds too good to be true, especially when you hear claims like these:
"I just got a hot tip from an inside source that this stock will go through the roof."
"The rumor on the street is that this deal is about ready to take off."
"Your return is guaranteed. There's no way you can lose money."
get in on the ground floor now, or you'll be left out in the cold. We'll send
"This deal is so great, I invested in it myself."
"If this doesn't perform as I just said, we'll refund your money, no questions asked."
else who invested in this did very well."
Remember: investment opportunities that seem too good to be true probably are. Be especially careful if the salesperson downplays any downside or denies that risk exists.
Be wary if the salesperson doesnt ask you questions about your past investment experience and your ability to withstand risk. Even if the salesperson does ask a few related questions, beware if you get the sense that he or she is merely going through the motions.Characteristic #7: They like Ponzi schemes.
Self-respecting con artists wont admit that theyre involved in a Ponzi scheme. In a typical Ponzi scheme, large returns are paid to initial investors out of the funds of later investors. This gives the first investors confidence and motivates others to invest. Unfortunately, the later investors lose all or most of their money. If you are promised high, guaranteed profits and given no documentation about the investment, the promoter, or the risks, be careful. Ponzi operators also tend to persuade you to roll over your profits into yet another investment, so your return ends up on paper only.
Characteristic #8: They also like pyramid schemes.
Pyramid schemes are a variation of the Ponzi scam. Think of a pyramid. Money is collected from people on the bottom to pay off other individuals farther up the pyramid. As more people invest, new pyramid levels are created, and your position in the pyramid rises. In theory, you would be entitled to more money. Many times, you must also buy a product to join. However, unlike a true multi-level marketing plan, selling the product is less important than recruiting others to join the network. Ultimately, there comes a time when no new money flows in. When this happens, the pyramid collapses.
Tips to help you avoid falling prey to a con artist.
The Oregon Financial Information and Identity Theft Outreach programs provide publications and speakers covering a wide variety of investment-related topics.
Speakers are available to