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Six Ways to Spot Con Artists

They become part of “the crowd.”
Effective con artists disguise their true motives by blending in with others in your group, whether that group is political, community (such as the local senior center), religious, or other. They get to know people in the group and use them to spread the word about a “great investment.”

They dress for success.
Con artists can appear very professional and successful or look like the person next door in more casual wear. They also may have impressive-looking offices, or give you the idea they do. Be suspicious, however, if you have to meet them at a restaurant or coffee shop and they have a post office box rather than a street address.

They often push complex and vague financial products.
Investing can be confusing and con artists know it. They are ready to “help” you with your investment decisions. Don’t let them. When it comes to your money, think through all the options. Never give someone control of your money just because you think you are too old, too young, or too financially inexperienced.

They know what “buttons” to push.
Skilled con artists know how to prey upon your emotions by inferring that you will not have enough money for retirement or that the investments you have are not earning enough. Do not make investment-related decisions based only on your emotions.

They are fair-weather friends.
When you first meet, con artists are friendly. They take a personal interest in you. They call back when they promised. Each time, they tell you even more good things about the investment. However, once you have invested your money, contact with the con artist dwindles and then stops altogether. Danger sign: They don’t return your phone calls or emails, or their phone is disconnected.

They will tell you what you think you want to hear.
Every investment involves risk. But to hear a con artist explain it, the investment can't fail. Trust yourself when something sounds too good to be true, especially when you hear claims like these:

"I just got a hot tip - this stock will go through the roof."

"Your return is guaranteed. There's no way you can lose money."

"Get in now or you'll be left out in the cold. We'll send a messenger over tomorrow to pick up your check."

(Con artists often use this device to avoid federal mail fraud charges.)

"This deal is so great, I invested in it myself."

"If it doesn’t work out, we'll refund your money, no questions asked."

Remember: Investment opportunities that seem too good to be true probably are. Be especially careful if the salesperson downplays any downside or denies that risk exists.

Warning Signs

  • Big return with a quick turnaround
  • Guarantee return on investment
  • No risk
  • It is backed by the government
  • No information

LaVonne Treat says she missed some of the red flags when she invested in a goldmine. See her story.

Watch out if a financial professional is reluctant to provide information on the following:

  • The background, education, and work experience of the deal’s promoters, principals, or general partners
  • Information on whether the money you invest will be segregated from other funds available to the business
  • Written information on the business’ financial condition, such as a balance sheet and bank references
  • The track record of the business and its principals
  • The salesperson’s name, location, employer, background, and the commission or other compensation he or she will receive
  • The salesperson’s real interest in the venture and any affiliates
  • Their licensing status. Those selling securities must have a securities license with a regulator such as a state securities agency or the Financial Industry Regulatory Agency (FINRA). Check and verify licensing here.