It is scary out there. New tactics for defrauding investors seem to emerge daily, with the ‘elder’ population – those over age 60 – being the greatest targets. Financial Crimes Enforcement Network (FinCEN) reported $27 billion in “Elder Financial Exploitation” over a one-year period between June 15, 2022, and June 15, 2023.
With the continuing advancements in Artificial Intelligence (AI), the fraudsters are gaining ground and it’s becoming increasingly more important for everyone – not just the ‘elderly’ – to be aware and take steps to protect against financial exploitation. We are all at risk of being victimized. The good news is, there are steps you can – and should - take to protect yourself and your financial life.
Set strong passwords for all accounts, don’t use the same password for any two accounts, and change your passwords at least every six months or if you suspect fraudulent activity
You are your own greatest defense, and this begins with establishing strong passwords for every website you log into. Strong passwords are a mix of letters, numbers, and special characters or long ‘passphrases’ – a series of words/phrases that means something to you but that others wouldn’t easily guess. Writing passwords down – in a secure place, not in a file on your laptop – or using a password manager is the best way to keep organized. NEVER share your passwords with anyone, and NEVER use the same password for multiple accounts; if by chance a fraudster gets one password, it would only give them access to one site and not every site. Maintain vigilance over your accounts and request removal of login credentials from any website you’re no longer using – you may do this by contacting the website vendor. Changing passwords every six months may seem like overkill, but it’s a good way to further ensure you’re protecting yourself and maintaining only those credentials you still need active. Passwords should be changed immediately if you suspect your personal information may have been compromised.
Set Multi-Factor Authentication (MFA) wherever possible
Many websites now require the use of MFAs, and there are different ways you can set these up. The most common is a text to your cell phone; others include apps on your phone or calls to your phone. Having MFAs establishes a secondary ‘layer’ of protection; if a fraudster was to somehow guess – or steal – your password, they would be barred from entry if they can’t enter the MFA code.
Avoid using ‘public’ Wi-Fi when accessing bank and investment accounts
You can never be sure who may be looking over your shoulder or implementing tactics to gain access to your device when using public Wi-Fi. Avoid this practice; consider a VPN - or minimally a private ‘hotspot’ - when traveling. Also, be sure never to leave your device unattended – keep it with you at all times.
Monitor your account activity and ensure you are receiving regular statements from your third party custodian.
All third-party investment custodians (Fidelity, Schwab, Vanguard, etc.) are required to prepare statements at least quarterly. Most providers now prefer that you opt for electronic statement delivery and will charge you for mailing paper statements. You should be aware of any charges for paper statements and ensure statements are being issued on a timely basis. It is equally – if not more – important to monitor your accounts regularly and report any suspicious activity to your Advisor and your third-party custodian. The custodian may have the ability to place a ‘passcode’ on your account – a word or number – that only you would know that would help them identify you in the event someone had gained access to your personal information (date of birth, SSN or other identifying information). If you hold investments that are not valued frequently, such as limited partnerships, you should receive confirmation that a reputable independent accounting firm audits them annually.
Obtain a copy of your credit reports annually – you are entitled to a free credit report once each year – and take the time to review each report
Obtaining and reviewing your credit reports is a useful step in protecting against fraud. You may obtain free credit reports annually from each of the three major credit bureaus – Equifax, Experian, and TransUnion – by going online to www.annualcreditreport.com or by calling 877-322-8228. A few minutes of your time reviewing these reports for any suspicious activity goes a long way in protecting you and giving you additional peace of mind.
Consider placing a ‘freeze’ on your credit with the three major credit bureaus
Placing a ‘freeze’ on your credit helps avoid fraud in that creditors cannot access your credit report, and this would keep them from approving any new credit account in your name. Nobody – not even YOU – can open a new credit account without temporarily lifting the ‘freeze’. When freezing your credit, you are given a code that you would need to use to ‘temporarily lift’ the ‘freeze’ in the event you are applying for credit. To place a ‘freeze’ on your credit, you would contact each of the three major credit reporting agencies separately: Equifax, Experian, and TransUnion.
Exercise care and caution when selecting an Investment Advisor
Here again, you are your best line of defense! Do not rush the process of selecting an investment advisor and be sure to ask questions – even if they seem ‘stupid’ to you. It has been said that the only stupid question is the one we did not ask! The most important question to ask and the one most frequently overlooked: Do you provide your services with the “duty of care of a fiduciary”? This service commitment binds the advisor to make recommendations based on the best interest of the client. If the advisor avoids this question or acts as if they don’t understand the question, find an advisor who does. One helpful resource for seeking a trustworthy advisor is the National Association of Personal Financial Advisors; visit their website at NAPFA.org. There are resources under the “Consumers” tab – such as their “How to Find an Advisor” and “Fiduciary 101” brochures – that will provide advice and questions to ask. It is unfortunate that we live in an age where trust must be earned, not freely given. There are people out there who would rather steal from you than protect you; it’s up to you to do a full ‘discovery’ of people before choosing to engage with them.
Never make an investment check payable to an Advisor; and ask questions before you invest
When you are purchasing investments, make your check out to the third-party custodian, not to your advisor. Never leave the payee portion blank. Read and understand any investment or advisory contract. Ask questions prior to signing. Once your money has been invested and the purchase is complete, it is too late to ask questions. Depending on the type of investment, your money may be tied up for years or you may be the owner of investments that you did not want. To avoid this situation, take your time. Ethical advisors give clients plenty of time and space to make decisions; their goal is to improve the quality of your life. Unethical advisors base their investment recommendations on the size of their commissions and possible sales bonuses - if that requires pressing clients to make a quick decision, they will and do.
If an investment opportunity sounds too good to be true, it probably is.
If the investment sounds too good to be true, that’s because it is. When your advisor recommends a fund, insurance contract or investment strategy, listen carefully and ask for a list of Pros and Cons. Request a description in writing, so you can clarify and clearly understand all the benefits and risks. If you hear the words “always” or “guaranteed” from an advisor, RUN, don’t walk away.
