USAA - Spring 2014 - (Page 19)

BYMITCH LIPKA PHOTOGRAPHY BYJOHN KUCZALA ByDesign T SPOTTING THE TELLTALE SIGNS OF SHADY DEALS, SCAMS AND FRAUDULENT INVESTMENT OFFERS he offer is seductive: an investment with the promise of doubling your money in one year. What's not to love about making lots of money quickly and supposedly without risk? According to the Financial Industry Regulatory Authority (FINRA), a pitch like that has all the hallmarks of a scam that too many people fall for: risk that isn't explained - or often understood - and the promise of returns that are too high. Such promises of return are dangled at investors all the time in emails, by skilled con artists in person and at free-lunch seminars. Each year, some 30 million Americans are defrauded of more than $50 billion, according to a 2011 report by the Financial Fraud Research Center, a joint project of the Stanford Center on Longevity and the FINRA Investor Education Foundation. In a 2013 report on financial fraud, the FINRA foundation revealed that "many Americans have unrealistic expectations of market returns." Another major concern, says Gerri Walsh, president of the foundation, is a startling lack of fraud awareness. "One of the most disturbing findings is that many Americans can't identify the classic red flags of fraud." The report was based on a survey that put nearly 2,400 Americans to the test, raising what should have been red flags. Instead, the survey found green lights from many of the respondents. Is an annual return of 110 percent appealing? More than 40 percent said it is. Would you go for an investment pitched as "fully guaranteed?" About 43 percent said they would. In its report on the survey, the foundation noted that "the ubiquity of fraud solicitations, coupled with the inability of many people to recognize the red flags of fraud, places a large number of Americans at risk of losing money to scams." About four in 10 people missed what should have been obvious warning signs, according to the survey. But if you don't understand how investments are supposed to work, the warning signs are not that obvious. And, Walsh says, the people soliciting your money understand those vulnerabilities, taking advantage of both that lack of knowledge and the desire to make money quickly. usaa.com SPRING 2014 USAA Magazine 19 http://www.usaa.com

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USAA - Spring 2014