It’s a fear we can all relate to: someone steals your online information and turns your financial life upside down. Or maybe the “person” you were texting with online about buying their patio furniture turns out to not be the person you thought it was at all.
You’re not alone in thinking financial scams are more prevalent now than ever. According to a recent report from Barclays, many scams and fraud cases are now happening on “social media, online marketplaces, and dating apps.” The truth is that scam artists are getting more creative and have more tools at their disposal to take advantage of unsuspecting internet users.
It goes without saying that financial security is always important – but it’s especially critical as you approach and enter retirement. In the event of a financial scam where you suffer losses later in life, you have less time to “recover” and rebuild your nest egg. Add to that, a large percentage of financial scams actually target individuals at or nearing retirement. This makes staying informed and taking proactive protective measures even more important.
Luckily, there are several steps you can take to better understand the threat of financial scams, recognize them more quickly, and have a plan of action if you end up being a victim.
Go from anxiety to confidence with your money.
Trust Your Gut: Identifying Warning Signs
First things first – you likely know more than you realize about financial scams. Common red flags that indicate a potential scam might include unsolicited calls or emails, or having someone request you wire money without first meeting in person.
Sometimes these scams take place when making large purchases, like putting down a security deposit on a living space, or buying a boat or car. In these cases, if you’re uncomfortable shopping virtually or in an online marketplace, you may second guess yourself and talk yourself into thinking “this is just the new normal.”
This may be especially true in a post-pandemic world. The way we make purchases and interact with others online has changed dramatically. Just remember: even if you feel uncertain, your gut instinct is absolutely worth listening to. If something feels “off” about a situation or a financial request, don’t be afraid to hit pause. Someone genuinely interested in selling to you will understand if you pause a purchase to get more information, and unsolicited communication should always raise a warning flag – even in today’s highly-connected, virtual world.
When in doubt, get a second opinion. Confirm with your children, colleagues, friends, or neighbors to figure out if what someone is saying or asking you to do is considered standard. You may be surprised to learn that some seemingly inconspicuous requests are actually common financial scams in today’s marketplace.
For example, many scam artists will request to send a Zelle or bank wire payment for an item you’re selling on Facebook Marketplace or Craigslist. They will send more than they owe and request you send a portion of it back to them. This is a classic financial scam with a new technology twist – but looks relatively benign on the surface.
Understanding the Threat: Recognizing Common Financial Scams
There are several types of common financial scams, and many specifically target those who are nearing retirement. Here’s a deeper look at some of these scams and how to recognize them.
Have you ever received an email or call from someone pretending to be a trustworthy source or company? These types of communication scams are called “phishing” and they’re usually designed to gather personal information, like credit card numbers, bank account information, and passwords.
One way you can vet the source of an email is by checking the “from” email address. If it says something like “email@example.com,” it’s not a genuine email. All major companies have their domain connected to their email software. For example, colleagues at our company are reached at “NAME@abacuswealth.com.”
You may also run into phishing scams where fraudsters pose as realtors or rental companies. In these cases, the scam artists list an apartment or home for rent online. They may tell you to go ahead and tour the property or look around outside while they’re not there.
Then, when you’re ready to move forward, they have you wire a security deposit to them so they can send you appropriate contracts and documentation. In these cases, the apartment or home you toured is likely empty and unoccupied, but the scam artist has no relation to the landlord or property management and is not authorized to make lease decisions. The moment security deposit funds are wired, you won’t hear from them again.
Scam artists prey on pre-retirees and retirees looking to dip their toes into the world of online dating. By using a fake profile, they build trust through the start of an online relationship, then start to make financial requests or requests to share personal information once their victim feels more connected to them. They may ask to wire money, to book hotels or flights for them, or to share personal information so they can help “plan” a getaway to meet in person.
Scam artists attempt to get investors to buy into an investment that either won’t pay off or will offer the scam artist a large profit. A few types of investment fraud to watch out for might be:
- High Yield Investment Programs
- Microcap Fraud
- Ponzi Scheme
- Pre-IPO Investment Scams
- Pyramid Schemes
If someone is able to steal your identity, they can open credit cards in your name, file tax returns in your name, and drain your savings. Identity theft is incredibly serious, and it’s critical to closely monitor your credit score to see if any unusual accounts have been reported. You can also regularly check your bank account and credit card statements for unauthorized activity.
Arm Yourself with Knowledge: Educating Yourself About Scams
The prevalence of fraud may feel overwhelming, but you can often avoid common scams simply by educating yourself. If you want to learn even more about different types of fraud, or what scams are currently popular, you can always check out reputable information sources like these:
Your financial advice team, your bank, and your investment custodian are all excellent resources as well. It can also be useful to subscribe to scam alerts and to set fraud alerts on your financial accounts to help remain vigilant.
Strengthening Your Financial Fortress: Protective Measures
Anyone can be the victim of scam artists and fraud schemes. It’s critical to put protective measures in place and focus on what you can personally control to minimize risk and secure your assets. There are several practical ways you can use security measures in your personal and financial life to get started:
1. Set Unique Passwords or Use a Password Manager
Whether you prefer LastPass, 1Password, Dashlane, or another resource, consider implementing a password manager for you and your family. Good password managers allow you to securely save all of your passwords in one place, and will auto-generate unique passwords for you. This means you have a high level of protection but you don’t have to remember random configurations of letters and numbers to access your accounts.
2. Update Your Passwords Regularly
To keep online thieves from accessing many of your accounts at once, you should really never use the same password across multiple critical login systems (think banking, investment portfolio, mortgage login, and social media). You can also help avoid this by updating your passwords every 6 to 12 months.
3. Avoid Sharing Sensitive Information
If you can, don’t share passwords with anyone who isn’t on your shared family password manager account. The more you share, the more opportunities there are for your information to be found and misused.
4. Use Two-Factor Authentication or Encryption
While it may seem like a pain, this extra level of security doesn’t take long to implement and makes it possible for you to catch fraudsters before they log in to your accounts.
If you’re concerned about using a password manager, or know it isn’t for you, you can still generate seemingly random passwords and update them regularly. Writing them down and storing them in a safe or locked area of your home can be an “analog” way of tackling the problem.
A More Secure Future
Worried that you’ve been a victim of a fraud or scam? Start by reporting the incident to the Federal Trade Commission (FTC), relevant authorities, and any financial institutions necessary such as your bank or investment custodian. You can also consider investing in cybersecurity insurance and/or setting up fraud alerts on your accounts until you feel you’re in the clear after a scam takes place.
If you’re worried about security for your financial life, working with a financial advisor to create a scam-prevention plan can also be helpful and bring some peace of mind. Abacus believes in helping people find security, freedom, and ease with their finances. Reach out to us today and see how we can help you expand what’s possible.