FINRA Study on Emotions & Financial Fraud

FINRA Study on Emotions & Financial Fraud

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2016-08-04

This week is National Fraud Awareness Week, and according to the Investor Protection Trust, almost one in five Americans over the age of 65, or nearly seven million seniors, have been taken advantage of financially. A recent study from Stanford University, FINRA, and AARP revealed that inducing strong emotions has an effect on older adults’ financial decisions. 

“This of course does not mean that everyone over the age of 65 is incapable of making good financial decisions,” says Executive Vice President, Investor Services, Daniel Lerner, of David Lerner Associates. “Some of the top financial figures in the U.S. are seniors; George Soros and Warren Buffet are 85 years old. Many older Americans are very shrewd investors who are not swayed by emotions when it comes to money and investments.”

Elder financial abuse is a major issue in the United States, but there are preventive steps you can take to protect yourself:

  1. Ask questions. The best way to protect yourself is to ask lots of questions. Find out about risk, liquidity, and any early withdrawal fees. 
  2. Read the disclaimers and the fine print. Even though it’s full of legalese, make sure that you really do know everything there is to know about the investment before you make a decision.
  3. Work with a trusted advisor. Establish an investment profile, and work off a “Sensible Middle Ground of Investing” strategy that meets your personal goals.
  4. Get to know the techniques fraudsters use. If it’s too good to be true, it usually is. The “wealthy prince” or sweepstakes winner emails or telemarketing scams typically play on the emotions of older Americans. Cons are skilled at getting their victims into a heightened emotional state where you may suspend rational thinking and willingly hand over your hard-earned money.
  5. Keep personal information private. Never give out credit card, banking, Social Security, or other personal information over the phone or by email. All personal information should be kept private unless given to a trusted source.

The FINRA study notes that money is an emotional topic, and managing one’s emotions around financial decisions is critical to avoiding fraud. Recognizing the mechanisms of scams can help investors protect themselves. 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. 

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 516-921-4200 Visit our website: www.davidlerner.com

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Jake Mendlinger
Account Manager
Zimmerman/Edelson
516.829.8374 X 232
jmendlinger@zimmed.com

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