Why are Seniors So Gullible to Scammers?

[Chuckanut]

I am reminded that many of Bernie Madoff’s investors were supposedly sophisticated people who should have known better, but were suckers due to their greed

 

[friar1610]

What a great volunteering gig! I'd love to see the course material.

Do you think it helped? What kinds of questions did you get? Did the students really seem engaged?

These are the Power Points:

https://assets.aarp.org/www.aarp.org_/articles/money/protect_investments.pdf

There is also a facilitator's guide as well as some videos that amplify the PPs. There were also good handouts for the participants. I don't know if the program is still active. I was involved for about 3 years when I lived in VT and I left there almost 5 years ago.

I frankly don't know how much good it did. The program was focused on getting people to be aware of the tactics and techniques used by fast buck artists in the financial arena. It also tried to make people aware of how to check out salesmen and brokers to find out if they were appropriately licensed/registered and if they had any complaints lodged against them. It certainly didn't give any investment advice nor advocate any specific approaches (e.g., stick to bonds, go with index funds, etc.) I got the impression that a lot of the audience either lived off of pensions/SS/CDs or had financial advisors they had been with for years and we're going to stick with. I would sometimes get questions that bordered on seeking financial advice and I would waffle on those because that wasn't my purpose. Students ranged from being totally engaged to finding the sessions a good opportunity to catch a quick nap.

I mentioned that military people are also big scam targets - I would have much preferred to have been presenting to young military folks where there was a better chance of helping them long term. And I am retired Navy so have seen first-hand how the young troops are preyed upon. Alas, there were no military bases in VT.

Feel free to PM or email me if you have more questions. Notice you are from ME. I was stationed there with the Navy 1989-1992.

 

[Sunnymar]

I am reminded that many of Bernie Madoff’s investors were supposedly sophisticated people who should have known better, but were suckers due to their greed

How did they display greed, they were not promised excessive returns?

 

[Chuckanut]

How did they display greed, they were not promised excessive returns?

Yes, I see that he averaged only 12% a year. Good point. Thanks for the correction.

 

[growing_older]

How did they display greed, they were not promised excessive returns?

Madoff was promising unrealistically good consistent returns of better than 12% year over year. He was deliberately cultivating the rumor that he achieved these unrealistic returns by illegally front running the order flow from his legit business, but that he himself was too big and important for the SEC to take enforcement action against. That's why you had to know someone to get in on his investment scheme. Greedy investors believed they were going to benefit from his illegal scheme, when in fact they were just being taken in by it.

 

[scrabbler1]

Some of Madoff's deception included faking investment reports by including names of actual mutual funds he claimed the money was invested in. I recall one news story about this which hit home a little bit because Madoff included the name of a bond fund I am invested in. But the problem with that was that bond fund had changed its name a few years earlier and the report still included its old name.

 

[audreyh1]

Madoff was promising unrealistically good consistent returns of better than 12% year over year. He was deliberately cultivating the rumor that he achieved these unrealistic returns by illegally front running the order flow from his legit business, but that he himself was too big and important for the SEC to take enforcement action against. That's why you had to know someone to get in on his investment scheme. Greedy investors believed they were going to benefit from his illegal scheme, when in fact they were just being taken in by it.

Seriously - it was too good to be true. But I didn't know about this angle which explains why some folks thought they understood why it was "too good to be true" and cheerfully took advantage.

 

[Nightcap]

A lot of it is fear based tactics. We send 18 yr. olds off to war because they don't have this fear.

Now, as for those kids... I would contend that they are pretty gullible too, but in a legal scam sort of way. Marketing is still alive and well and companies are legally selling all of us crap, that we dutifully eat up. The best scam is one that doesn't appear to be one at all. For example, a certain company recently admitted to slowing down your device because they were "helping" your user experience. Right.

The gullible person uncritically believes everything he reads. The cynic believes anything he reads that's critical. Both are wrong.

I don't know what your technical expertise is, but I suspect you don't understand the technology and find it easier to attribute power-management algorithms to greed and malice.

This same apparent willingness to believe the worst was evident over a year ago when a small number of people noticed their iPhones shut down if they were (a.) running processor-intensive programs and (b.) had less than 30% battery charge. Their complaints led to Apple adding additional power-management to keep the devices running in those circumstances.

People are gullible when something appears to confirm their prejudices.

 

[JoeWras]

I don't know what your technical expertise is, but I suspect you don't understand the technology and find it easier to attribute power-management algorithms to greed and malice.

Ha ha ha! I actually work in that area! "malice:" No. "greed:" uh, let's call it marketing.

I could get way in depth on this topic. I apologize for bringing it up because the Android vs. iApple war could go on. That would derail the topic. My fault, bad example. Sorry.

 

[Nightcap]

Ha ha ha! I actually work in that area! "malice:" No. "greed:" uh, let's call it marketing.

I could get way in depth on this topic. I apologize for bringing it up because the Android vs. iApple war could go on. That would derail the topic. My fault, bad example. Sorry.

Far be it from me to engage in religious wars! I look forward to a topic more conducive to talking about your area of expertise.

 

[CaptTom]

I mentioned that military people are also big scam targets - I would have much preferred to have been presenting to young military folks where there was a better chance of helping them long term. And I am retired Navy so have seen first-hand how the young troops are preyed upon. Alas, there were no military bases in VT.

Feel free to PM or email me if you have more questions. Notice you are from ME. I was stationed there with the Navy 1989-1992.

You're right about that. These kids (and I'm old enough that I can call them kids) are really bright, but have had a rotten education when it comes to financial matters. That AARP program doesn't really apply to them. They need a more basic "managing my money" curriculum.

As it happens, I would probably be able to set something up at some local units, if the right materials were available. I've done training at Navy and CG bases before, teaching navigation and small-boat safety. I know at least as much about pinching pennies as I do about those topics!

 

[friar1610]

You're right about that. These kids (and I'm old enough that I can call them kids) are really bright, but have had a rotten education when it comes to financial matters. That AARP program doesn't really apply to them. They need a more basic "managing my money" curriculum.

As it happens, I would probably be able to set something up at some local units, if the right materials were available. I've done training at Navy and CG bases before, teaching navigation and small-boat safety. I know at least as much about pinching pennies as I do about those topics!

In another volunteer gig years ago I tried to set up a basic financial smarts course for an inner city adult audience in Baltimore. That course went nowhere but there is an excellent ( and very basic ) curriculum available from the FDIC that I was planning to use. There is a virtually identical one available from the NCUA, differing only in that it mentions credit unions in addition to banks.

 

[CaptTom]

In another volunteer gig years ago I tried to set up a basic financial smarts course for an inner city adult audience in Baltimore. That course went nowhere but there is an excellent ( and very basic ) curriculum available from the FDIC that I was planning to use. There is a virtually identical one available from the NCUA, differing only in that it mentions credit unions in addition to banks.

Thanks for the pointers!

I, too, have an urge to do something like what you tried. I feel like if only I could *reach* people who make such poor financial decisions, I could make a real difference in their lives. It's probably fantasy.

A bunch of us old guys were talking over drinks last night about one of our little group who has made some poor choices of his own, mostly through inaction. He could be in much better financial shape if he put in just a little effort. But that's not in his character. Great guy, but all agreed we could never "teach" him to be motivated, much as we'd like to help.

 

[brett]

The big money scams, the most popular ones, where we live re ponzi/investment scams aimed at people in their 50's and 60's. The target is their retirement funds, home equity, etc. Many are affinity frauds.

Shame really, but often people spend more time buying a car or a television than the do understanding a potential investment. It is always the same. High returns with invested capital guaranteed and no risk. Makes no sense but that is the scam.

 

[CaptTom]

The big money scams, the most popular ones, where we live re ponzi/investment scams aimed at people in their 50's and 60's. The target is their retirement funds, home equity, etc. Many are affinity frauds.

Good points. We went to one of those "financial planner" free dinners once, and actually followed up with the guy. He tried everything to get us to take out an annuity (or several) that would net him big commissions. None of them made financial sense for our particular situation. YMMV, but to me that whole thing is a big scam. Like you say, they are after your retirement funds, etc. Just that it happens to be legal. I often wonder how many suckers, er, clients he got from those dinners.

 

[brett]

We have had two large ones in our area, both at over $500M plus a few smaller ones at $300M down to $10M. With at least one suicide from a victim who lost everything.

These crooks preyed on folks who had lost considerable sums in the 2008 recession and were looking for ways to increase their depleted financial base in order to retire. Many actually believed the claims of 30 percent returns, etc. It simply did not make sense. There were three key ingredients.

First, the victims wanted to believe the claims.

Second, they did little research and unbelievably to me actually thought that their investment was 'guaranteed'. Including investments in currency trading schemes and offshore gold mines.

Third....they either trusted the seller or blindly took the advice of friends who did. Church groups were particularly hard hit. The biggest one was operated by a former Pentecostal Pastor. Despite having no real estate experience people actually believed that their money was safe and the returns were real because of his vocation. Same with a few other faith groups and immigrant groups.

It is one thing to loose you investments. Others lost their homes because they were encouraged to mortgage unsecured properties in order to invest.
Go figure.

 

[beowulf]

The pressure to buy and invest is far greater on older folks than younger ones. Constant phone calls, emails and snail mails inviting us to come to investment seminars, etc. Sometimes I think the SSA is selling our personal info. While younger people may be just as gullible as older ones, the crooks/scammers go where the money is. When I was a young 2LT in the Army, there were always hoards of sales people trying to sell stuff to the soldiers. But we just didn't have enough money to make it really profitable for them. Yeah, we bought some pots and pans and silverware and even invested in a load mutual fund, but only spent/invested money we could afford. The real losers were the young soldiers who took payday or car loans at exorbitant interest rates. As I became older and read more, I developed a real aversion to sales tactics - any sales tactics. I retain that to this day - anyone who approaches me to sell anything is immediately ignored. It's a simple principal - if I didn't think I needed something, why would I buy it from anyone trying to sell it to me?

And, of course, now that I'm an older curmudgeon with rapidly disappearing filters, I have even more visceral responses to anyone who tries to sell stuff to me. That doesn't mean that I won't eventually see a real cognitive decline, but now it's just limited to forgetting where I put things.

As far as kids go, our children are in their mid 40s and even the one with a MBA doesn't have a clue or interest in investing. They are also far more trusting of recommendations from friends or casual acquaintances that I ever was. I still have to handle their investments as they have absolutely no interest in spending time on that. I do worry what will happen when I'm gone - they will probably use the first high priced financial adviser who approaches them. Oh, well.

 

[brett]

We no longer have land line phones, or VOIP for that matter.

We use two cell phones. IF the caller ID is unknown to us we simply do not respond. If it is important they will leave a message.

Same with the junk mail. It hits the recycle bin unopened and does not make it into the house. Most especially those marked important or time sensitive.

Notwithstanding all the ponzi and false investment scheme coverage in our local media some people are still falling prey to it. Hard to comprehend.

We don't like free anything...lunches, dinners, cruises. We cannot afford free.