Scam #7: Investment and “Guaranteed Return” Scams
For those living on a fixed income or trying to make their retirement savings last, the promise of a high-return, low-risk investment can be very appealing. Investment scams are designed to exploit this desire for financial security, often using complex jargon and high-pressure tactics to trick you into parting with your savings.
These senior scams can come in many forms. You might receive an unsolicited email or phone call about a “once-in-a-lifetime” opportunity. It could be an invitation to a free lunch seminar where a charismatic speaker pitches a complex financial product. The investment might involve anything from real estate and precious metals to cryptocurrencies or promissory notes.
The common thread in all these scams is the promise of something that doesn’t exist in the real world of investing: very high returns with little or no risk. The scammer will use phrases like “guaranteed profit,” “can’t-miss opportunity,” or “get in on the ground floor.” They will create a sense of urgency, pressuring you to invest immediately before the opportunity is gone. They might also claim to have inside information or a secret formula for success.
They will often try to build a relationship with you, appearing friendly and trustworthy. They may discourage you from discussing the investment with family members or a financial advisor, claiming they “wouldn’t understand” this special opportunity. If you invest, your money typically just goes into the scammer’s pocket. They may even send you fake account statements for a while that show your investment is growing, encouraging you to invest even more before they disappear completely.
How to Avoid Investment Scams
Protecting your nest egg from financial fraud means relying on proven investment principles and being deeply skeptical of any offer that sounds too good to be true.
Understand the Relationship Between Risk and Return. In the world of investing, there is no free lunch. To get a higher potential return, you must take on a higher level of risk. Any promise of guaranteed high returns is a massive red flag.
Be Skeptical of Unsolicited Offers. Legitimate investment professionals do not cold-call potential clients with secret, can’t-miss deals. If someone contacts you out of the blue to pitch an investment, your safest move is to hang up or delete the email.
Do Not Be Rushed. Scammers use high-pressure tactics to prevent you from doing your research. A legitimate investment opportunity will still be there tomorrow. Take your time to investigate any proposal thoroughly.
Verify Credentials. Always work with a licensed financial professional. You can verify the credentials of an investment advisor or broker through official sources like the Financial Industry Regulatory Authority (FINRA) or the U.S. Securities and Exchange Commission (SEC). The Consumer Financial Protection Bureau (CFPB) also offers resources on avoiding financial scams.
Ask Lots of Questions. If you don’t understand an investment, don’t put your money into it. Ask for a prospectus or other official documentation and have it reviewed by a trusted, independent professional who you have hired yourself.
Your retirement savings are the result of a lifetime of hard work. Make sure they are managed with care and caution, not gambled on a high-pressure promise.