A savvy con artist knows that to separate you from your money, they must gain your trust. While investment fraud often conjures up images of shady-looking characters, the reality is that a con man will use every tool at their disposal to appear reputable and legitimate.
If you wish to protect yourself from investment fraud, there are several warning signs you should be on the lookout for. Though these signs don’t always mean you’re faced with fraud, you should be extra cautious if you notice the following:
1. The no-risk sales pitch
Con artists commonly try to provoke basic human emotions to convince you to make an irrational decision. You should be wary of any salesperson who plays off your feelings during their pitch. Be on the lookout for sales talk that sounds too good to be true or includes promises such as get-rich-quick, above-market returns and low or no-risk. Every investment strategy has a weakness.
2. Unverifiable claims
You should never invest based on statements or claims alone. A good rule of thumb is to assume nothing is valid until you do some thorough research. Be distrustful of any opportunities that claim to be the “next big thing,” secret inside information or revolutionary new patents or technologies. Con men rely on these claims being difficult or impossible to verify.
3. A façade of sophistication
A con artist will go to extreme lengths to win your trust, including using fancy language, creating artificial marketing materials or even using various online aliases to give the appearance of many people involved. Remember, you can never judge a book by its cover. A professional website or brochure is not proof of validity – always do your due diligence before investing.
4. A lack of transparency
If you do invest, all of your investment accounts should be registered separately in your name. Any transactions should be fully accessible to you daily, either through account statements or the custodian’s website. You should be highly skeptical of account or activity statements generated by a manager and not an independent third-party or pooled funds where only the manager has custody.
5. Manipulative sales tactics
You must never rush an investment decision or let emotions dictate your choices. Many con artists will use intimidation or encourage you to invest on the spot based on trust or high-pressure sales tactics. Always investigate the salesperson’s claims carefully before investing.
Con men make it all too easy to be fooled into investment fraud. However, by staying alert and vigilant to the hallmark signs of fraud, you can make life much more difficult for scammers and safeguard your money.