Investment Schemes: Watch out for These.

 iDd uncovers fraudulent investment schemes and highlights the red flags to look out for. 

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Chapters

• 1:36 Advance Fee Fraud
• 2:35 Cold Calls
• 2:54 Gauranteed Returns
• 3:40 Advice to Retire Early
• 4:36 Steps to Take & Tips to Use
• 5:59 Misleading Designations
• 7:43 Complex Products
• 10:33 Complex Product Takeaways
• 10:51 Information Manipulation & Newsletters
• 13:30 Seminars
• 14:55 Stock Fraud

Transcript

Hey everyone, welcome back.
You know, it seems like every day we hear a new horror story
about those investment scams.
People losing their life savings, their dreams,
it's heartbreaking.
It really is, and unfortunately,
these scams are more common than you might think.
Right, that's why I'm so glad we're doing this deep dive.
You know, getting into the nitty gritty
of how these schemes work,
so our listeners can protect themselves.
I was actually going through the articles
and reports you shared, and wow,
some of these tactics are seriously sneaky.
Absolutely.
The scammers behind these schemes,
they're clever, they know how to manipulate,
they use psychological tricks,
and then they throw in these complex financial products
to confuse people.
It's like a recipe for disaster.
It's like they're playing chess with your money,
and most people don't even realize they're in the game.
Exactly.
Okay, so to unpack this,
I thought we could break these schemes down into categories,
kind of like a scammer's toolbox.
But as we talk,
remember, they often use tactics
from multiple categories at once.
It's rarely just one thing.
That's a really good point.
It's never as straightforward as it seems.
Right, so let's start with a category
that I think really tugs at people's heartstrings,
schemes that prey on your emotions and your trust.
Oh, absolutely.
These are the ones that really get you
because they target people who are hopeful,
looking for a brighter future,
maybe a little too trusting,
which makes them vulnerable.
And that hope that desire for a better life,
it can make you susceptible to something
that sounds too good to be true.
Exactly.
Take advance fee fraud, for example.
I used to think, come on,
who actually falls for that.
But reading through these stories,
it's easy to see how people get caught up.
Oh, yeah.
It's easy to judge from the outside,
but these scammers, they're good at what they do.
They target people often overseas
with these promises of huge inheritances
or incredible investment opportunities.
But there's a catch, right?
They just need a small fee up front
to release the funds.
The old, we just need a little bit of your money
to unlock your fortune trick.
Classic.
Exactly.
But it's never just a small fee, is it?
Never.
It starts small, but then there's always another fee,
another delay, another excuse.
And they create the sense of urgency, too, you know?
They might say things like,
your assets are frozen or you're in legal trouble.
Anything to pressure you into acting quickly
without thinking?
Well, so besides those obvious red flags,
what else should our listeners watch out for?
Like, what are some telltale signs
that someone's running in advance fee fraud?
Well, a big one is cold calls.
If you get a call out of the blue
from someone you don't know, promising you
an amazing investment, that's a huge red flag.
Yeah, it's like that saying,
if it sounds too good to be true.
It probably is, that's the one.
Exactly.
And along those lines, be wary of any promises
of guaranteed returns,
investing always involves some level of risk.
Anyone claiming otherwise
is likely trying to pull something over on you.
So if someone calls with a can't miss opportunity,
that's the thing to do is just hang up.
Honestly?
Yeah, hang up.
Or if you're feeling up to it,
tell them you need to do some research
and you'll get back to them.
Then take that time to verify their legitimacy.
If you're dealing with a broker,
you can use Finars, broker-check website.
Oh, yeah, that's a good one.
And folks, make sure you're on the actual
NRW website, not some fake one.
Type the address in directly.
Don't just click a link in an email.
You can't be too careful.
Absolutely.
Okay, so we've covered advance fee fraud,
which can happen to anyone.
But let's talk about a scheme
that might be particularly appealing
to those nearing retirement advice to retire early.
I mean, it's the dream, right?
Retire early, travel the world, enjoy life.
Who wouldn't want that?
But I'm guessing it's not always what it's cracked up to be.
Unfortunately, you're right.
While early retirement is a fantastic goal,
a lot of these schemes,
they push people toward very high risk investments,
promising unrealistic returns.
So those promises of,
you'll make just as much if not more in retirement
as you did while you were working,
that's all exaggerated.
Most of the time, yes.
They downplay the risks
and might even make misleading claims about tax loopholes.
And while loopholes do exist,
they're often misrepresented
and certainly don't erase the inherent risks
that come with early retirement.
And I imagine early retirement,
especially if it's unplanned
or based on bad advice,
it can really derail your long term financial stability.
Oh, absolutely.
It can be devastating.
That's why it's so important to be cautious
about any advice that seems too good to be true,
particularly when it comes to something
as important as retirement.
So if someone approaches you with an opportunity
that promises early retirement,
what are some steps you can take
to make sure you're not falling into a trap?
Well, Finnera, they have 10 excellent tips
for the specific situation.
And one of the biggest ones is to be wary
of those free lunch seminars.
Ah, yes, the classic free lunch seminar.
They're everywhere.
And they're often used to lure people in,
get them in the door with a free meal
and then bombard them with these high-pressure sales tactics.
It's like they say there's no such thing as a free lunch.
Exactly, especially when it comes to investing.
So yeah, if you see an ad for a free seminar
promising early retirement secrets,
that's a big sign to proceed with caution.
Big time.
Another important tip is to be realistic
about your risk tolerance.
How comfortable are you with the idea
of your retirement funds fluctuating?
Yeah, because you don't want to be gambling away
your golden years.
Exactly.
And if you are considering retiring early,
know your current retirement plan inside and out.
Understand the tax consequences of cashing out early
and any potential penalties you might face.
And don't forget about those hidden fees.
Always, always read the fine print people.
Make sure you understand all the costs involved
before you even think about signing anything.
Absolutely.
Transparency is key.
And if someone's being evasive about fees,
that's a big red flag.
100%.
Yeah.
Speaking of things, not being what they seem,
let's talk about those senior specialist designations.
Right.
I have to admit,
this one really surprised me.
I mean, I knew there were financial advisors
who specialized in working with seniors,
but I had no idea how many misleading designations
were out there.
Yeah, it's a real problem.
The consumer financial protection bureau, the CFPB,
they actually did a whole report on this.
Did you know they found over 50 different designations
that target seniors?
And many of them lack any real oversight or standards.
It's like the Wild West out there.
So someone can just what put senior financial guru
on their business card and start giving advice.
That seems incredibly risky.
It is risky.
And unfortunately,
seniors can be more vulnerable to these tactics.
They might assume that someone with a fancy title
knows what they're talking about.
But the reality is,
these designations often focus more on sales tactics
than on genuine financial advice.
So it's less about helping seniors
make sound financial decisions
and more about just making a quick commission.
Sadly, that's often the case.
They might hold these free seminars,
offer to review your assets,
and then steer you towards products
that aren't in your best interest
all while hiding behind this veneer of expertise.
It's like a wolf and sheep's clothing.
So if a so-called senior specialist approaches you,
what's the best way to protect yourself?
What should you be asking?
Don't be afraid to ask tough questions.
What are their qualifications, really?
Are they licensed?
Have they had any disciplinary actions against them?
And don't just take their word for it.
Right, verify it.
Exactly.
Check with your state or federal securities regulators.
Look them up online.
It's better to be safe than sorry.
A thousand times, yes.
Never hesitate to double check someone's background,
especially when it comes to your finances.
Okay, so we've covered schemes
that prey on our emotions are trust, especially for seniors.
But our sources also win into schemes
that use complex products, confusing jargon,
to mislead investors.
Yeah.
I have to admit, I felt a little lost
reading about some of these.
Oh, it's understandable.
A lot of these products are designed to be complex.
It makes it harder for the average person
to understand the risks.
Like, for example, equity indexed annuities, EIAs.
I've seen ads for those, and I'll be honest.
I've always been a little intimidated
to even try to figure out how they work.
Yeah. EIAs, they're a prime example of a product
that sounds appealing on the surface,
but there are a lot of potential downsides
that they don't always tell you about
in those flashy marketing materials.
Okay, so break it down for me.
In simple terms, how do EIAs actually work?
Well, at their core, they combine a guaranteed minimum return
with the potential for growth
that's linked to a market index,
like the S&P 500, for example.
So you get a little bit of that security,
but with the potential for some upside,
if the market does well.
Right.
Okay, that sounds honestly pretty good so far.
So what's the catch?
What's the downside that they're not mentioning in the ads?
Well, the catch, like with many things, is in the details.
First of all, there are often hefty surrender charges.
Srender charges.
Yeah, if you need to withdraw your money early,
you could get hit with a pretty significant penalty.
So if you have an emergency,
need access to your funds, you're basically penalized for it.
Exactly, it's not as liquid as it might seem.
Okay, good to know.
What else?
Another thing to watch out for is that the guaranteed return
often doesn't activate until after the account
has been active for a certain number of years.
Oh, so you could be stuck in a low yielding investment
for a while before you see any of those big games they promise.
That's right.
And even then, those games are often capped.
So let's say the S&P 500 goes up 10%,
but your EIA has an interest rate cap of, say, 6%,
you're only gonna get that 6% return
even though the market performed better.
So they're putting a limit on your potential profits?
Exactly.
It is.
And then on top of all of that,
there's something called the participation rate.
The participation rate?
Yeah.
The participation rate is like you're betting on a horse
that can only win a portion of the actual prize money.
So even if the market's doing great,
your investment might not reflect that.
Unfortunately not.
You're not fully participating in the gains.
And of course, let's not forget about those administrative fees.
Those can eat into your returns over time.
It's starting to sound like EIAs
are more trouble than they're worth.
They can be.
Especially if they're not properly explained
or if they're recommended to someone
who it's not a suitable investment for.
So what's the takeaway for our listeners
when it comes to EIAs or any other type
of complex financial product for that matter?
Don't rush into anything.
Thuro research is essential.
Don't just take a sales person's word for it,
read the fine print, compare different products,
and talk to a trusted financial advisor
to see if it aligns with your goals and your risk tolerance.
Like anything else, if you don't understand it, don't buy it.
Exactly.
All right.
That was a lot to unpack with just EIAs,
but we have one more category to cover, right?
Schemes that center around information manipulation.
And I feel like that's a whole other can of worms.
Oh, absolutely.
It's like that old saying, don't believe everything
you read on the internet.
But with investing, it's more like,
don't believe anything until you verify it,
internet or not.
All right, trust but verify.
It's always better to be safe than sorry,
especially when it comes to your hard earned money.
A thousand percent.
And speaking of things you might read online,
we need to talk about investment newsletters.
Oh, yes, newsletters.
Because they often try to position themselves
as these exclusive clubs with like secret insider knowledge,
subscribe now to unlock our top stock picks.
That kind of thing.
Exactly.
And while there are legitimate newsletters out there,
there are also plenty that are part of what's known
as a pump and dump scheme.
Pump and dump.
That sounds shady.
It is.
Basically, what they do is they buy a large number
of shares in a company, often a smaller, lesser known company.
So it's harder to detect.
And then they use their newsletter
to pump up the stock price.
Spreading misleading or even completely false information,
trying to create artificial excitement around this company.
So they're manipulating the market,
making it look like this company is about to take off.
And then what happens when people
start buying into the hype?
Well, once they've pumped up the stock price enough,
that's when they dump their shares.
They sell everything at the inflated price,
make a huge profit, and leave all those unsuspecting investors
holding the bag when the price inevitably crashes
back down to reality.
That's awful.
So how can our listeners spot these shady newsletters?
What are some red flags to watch out for?
One of the biggest ones is outlandish promises.
If a newsletter is guaranteeing returns,
claiming to have some sort of exclusive insider information,
that's a major red flag.
It's like those spam emails.
Promising you'll get rich quick
with this one weird investment trick.
Exactly.
If it sounds too good to be true, it probably is.
Another thing to look out for is a lack of transparency.
Do they disclose their track record?
Who are their analysts?
Legitimate newsletters should be upfront
about this kind of stuff.
And if they're being vague or evasive,
it's probably best to just hit that unsubscribe button.
100%.
And while you're at it, take a moment
to research the newsletter or its publisher.
The SEC, the Securities and Exchange Commission,
and fine are all, they both have databases
where you can check for any disciplinary history.
Like a background check, but for your money.
Exactly.
Love it.
All right, so we've talked about newsletters,
but those online scams are just one piece of the puzzle, right?
We also need to talk about those in-person financial seminars,
particularly the ones that target seniors.
Right.
Those can be especially concerning
because they often use a lot of the same tactics.
The high pressure sales, the misleading information,
playing on people's emotions.
And their desire for a secure retirement, right?
Praying on those vulnerabilities.
Exactly.
They'll lure you in with promises of free meals,
exclusive insights, personalized advice,
but often their real goal is to sell you unsuitable products.
It's a sales pitch disguised as a helpful seminar.
So they're using the seminar as a platform
to push these products.
And they're usually targeting seniors
who might be more susceptible to those tactics.
Right.
They might emphasize the dangers of not investing
or create the sense of urgency, saying things like,
this offer is only available for a limited time.
Classic pressure tactic.
Act now before it's too late.
Exactly.
But remember, you are never obligated
to make a financial decision on the spot,
no matter how much pressure they're putting on you.
Take your time.
Do your research.
Don't let them bully you into anything.
Exactly.
So for our listeners who might find themselves
at one of these seminars, what's the best way
to protect themselves?
Go in with a healthy dose of skepticism.
Ask questions, locks of them.
If something doesn't sound right, trust your gut.
There's no such thing as a stupid question.
Exactly.
It's your money.
You have every right to ask for clarification
and take your time to make a decision
that feels right for you.
OK.
So we've talked about newsletters.
We've talked about seminars.
But there's one more type of information
manipulation that we need to address.
Microcap stock fraud.
Right.
And these are typically smaller companies
that we might not hear about as much in the mainstream news,
right?
Exactly.
Microcap stocks are often companies
that have limited assets, a short operating history.
And they usually trade on what are called
over-the-counter markets, which tend
to have fewer regulations.
So less transparency, more opportunity
for things to go wrong.
Unfortunately, yes.
And because they fly under the radar a bit,
it's easier for scammers to spread misinformation,
manipulate their stock prices without attracting
as much attention.
It's like the wild west of the stock market.
In a way, it is.
And they use a lot of the same tactics,
the pump and dumps, using online forums, social media,
even spam emails to spread the hype
and lure in unsuspecting investors.
So you're scrolling through your social media feed
and you see this post raving about this amazing company.
You've never heard of it.
But it's supposed to be the next big thing.
And they're urging you to buy now before you miss out.
Exactly.
And that's why it's so important to be very wary
of any unsolicited investment advice,
especially when it comes to these microcaps stocks.
So if you see a hot stock tip from some random person online,
best thing to do is just ignore it.
Absolutely.
Never invest-based solely on something
you see online or in an email.
Do your research.
If it's a legitimate opportunity,
it will still be there after you've
had time to look into it.
Always good advice.
If it seems too good to be true, it probably is.
The golden rule of investing.
Well, we've covered a lot of ground today
from emotional manipulation and complex financial products
to misleading information and outright scams.
It's clear that the world of investing
while potentially rewarding is also fraught with risks.
It definitely is.
But that's why knowledge is power.
The more you know about these schemes, the red flags
to watch out for, the better equipped
you are to protect yourself.
Absolutely.
And remember, it's your money.
You're the one in control.
Don't be afraid to ask questions.
Do your research.
And if something doesn't feel right, walk away.
Couldn't have said it better myself.
Being a savvy investor is the best defense against these scams.
So stay informed, stay vigilant,
and until next time, happy investing.