Consider It a Father’s Day Gift: Ways to Speak to Your Parents about Avoiding Fraud
Talking about money is never easy, especially with family and friends. When someone has dedicated years of hard work to building wealth and are confident in their financial decision-making abilities, they might not believe fraud could happen to them. But everyone is a potential fraud target, and even experienced investors are susceptible to scams if they miss essential steps.
So, what can you do when you fear a family member or friend may be a target for fraud?
Spotting Signs of Risk
Fraudulent activity could seem above board on the surface. Scammers’ promises might seem plausible, and their websites probably look official or sophisticated. It’s important to look beyond outward presentation for signs of more subtle manipulative practices. A family member or friend may be a target for fraud if:
- They are being rushed into making a decision about an investment
- They are offered a big favor in return for a “small favor”
- They are promised the prospect of unrealistic wealth
The above tactics are common in sales, and they don’t always indicate fraud. However, when they are used in relation to investing large amounts of hard-earned dollars, it’s important to ask, “Is this tactic being used to perpetuate a fraud?” If you notice that a family member might be overlooking these signs, start a conversation around their potential risk.
Starting the Conversation
When bringing up the risks of financial fraud, above all, exercise empathy. Understand that your loved one has worked hard for his money and takes his investment decisions very seriously. Try to identify their motivations and goals to understand their perspective. There are many reasons for investing, including investing for retirement, investing to help pay off debt from student loans, or investing to provide a steady income.
Family and friends who are retired or nearing retirement might have aggressive investment goals, due to significant financial challenges. According to AARP, nearly 30 percent of households ages 55 and up didn't have any pension or retirement savings as of 2013, and six out of 10 people age 50 and older financially support an adult child or relative. Fraudsters may target them with these challenges in mind, and they may be more susceptible to pressure from scammers. Keep in mind that many are investing due to sensitive financial situations and acknowledge the challenges they may be facing.
Few people want to hear or will accept believing that they are at risk. Approaching a conversation with this in mind will help to ensure your loved one doesn’t feel attacked. A great way to start the conversation is to acknowledge and respect their decision to invest. Then continue by offering insight into the many tools and resources available to them to help meet their goals.
For example, you might say: I know that you recently made the decision to begin investing and it sparked my interest in the subject as well. I have been learning a lot about how scammers have become extremely sophisticated in their operations. Can I share with you some of the information and resources that I learned?
Show, Don’t Tell
When family members agree to talk about investing, it’s important to show them how they can learn to protect themselves from financial fraud by sharing specific tips and resources. Family and friends will be more open to learning how to access the tools and resources on their own rather than being told what to do.
It’s generally best to stick to a few key points in the initial conversation, to keep from overwhelming them. Focus on these essential steps to provide a solid foundation:
- Conduct a thorough background check before investing, including registration status and disciplinary history.
- Make sure you understand the details of any opportunity, including all commissions and fees.
- Get all details in writing, including expectations and recourse if you’re not satisfied.
When sharing resources, you can include SmartCheck’s background check tools, the RED List, CFTC’s ASK CFTC tool and the FTC’s consumer resources. Allow your loved ones to feel in control of their financial future by knowing where and how to access the facts on their own. Approaching family and friends with these steps and tools will empower them to learn more about the dangers of financial fraud and to use the resources available to them to invest carefully.
If you spot the signs of risk, speak up! You could help to save those closest to you from losing their wealth to fraudsters.
Get the latest SmartCheck news sent to your inbox.Sign Up
Run a Check.
Know Your Pro.
Investing can be risky. Make sure your financial professional is properly registered and check their disciplinary history.Check
Spot something? Speak up.
Sketchy offer? Shifty sales tactics?
Give a tip to the CFTC.Submit a Tip