If it sounds too good to be true …
I’ve written about financial fraud involving seniors before, and it remains a serious concern. Unfortunately, there’s not much we in the investment industry can do beyond warning our clients to be vigilant and working through issues when they arise. As with any sort of fraud, the best defense is an educated and skeptical investor.
Let me share a recent situation encountered by one of Vanguard’s client-service phone groups.
One of our associates received a call from an 80-year-old client. Let’s call him Mr. Smith. He was about to receive a large sum of money and wanted to discuss his investment options. During the call, Mr. Smith explained that he had received a letter from an attorney in Africa informing him that one of the attorney’s clients had died and Mr. Smith was the next of kin. Mr. Smith was purportedly to receive $6 million as a first installment on the “inheritance,” but was asked to put up $2,300 to cover “administrative costs.” The letter included instructions for wiring the money.
The Vanguard crew member had the presence of mind to ask for details about the situation. He learned that Mr. Smith had already given the “attorney” his bank information, and was on his way to a Western Union office to transmit his money to Africa.
With Mr. Smith still on the line, our associate searched the Internet and found several reports about similar schemes. Unfortunately, the crew member couldn’t convince Mr. Smith that this was probably a scam. But he alerted our Fraud Department, and we called Mr. Smith immediately. He continued to be a tough sell, as he really thought this transaction was legitimate. Persisting, we strongly suggested that he call the FBI and ask them to confirm our suspicions. That was as far as we could go.
We later followed up with Mr. Smith. Fortunately, he did contact the FBI, and was persuaded that he’d been scammed.
This story ended well. But for some “Mr. Smiths,” it doesn’t.
Each time we run into this sort of situation, it’s tough to convince the shareholder that someone is out to take his or her money. Whether you’re being promised a risk-free investment, guaranteed returns, sweepstakes prizes, or a surprise inheritance, it’s important to approach any financial offer with caution and check everything out. Because if it sounds too good to be true, it probably is.
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Scamming seniors is one of the worst things we do to one another. From what you describe, Vanguard was able to prevent this specific case. Sadly, much of this cannot be prevented. People have to have the freedom to do what they choose- and this includes making a terrible decision when investing, even at the risk of criminals taking advantage of the elderly or ignorant. If people don’t have the choice of failing, we have a dictatorship or oligarchy!
“The story ended well”? Only if “Mr. Smith” was also told to go to his bank immediately to let them know what happened and to try to close the account for which he had given the “attorney” the information. Unless he did that, or simply emptied the account, the “attorney” would have emptied it for him.
This story shows the importance of reminding children to check on their parents to see how they’re doing and to help them through these kinds of situations. If there are no children around, then an alternate trusted individual needs to be found to do the job.
Having watched my parents and wife’s parents deal with the inevitable aging process leaves us concerned about who will be watching over us, as we watched over them. Decision making should follow a process establish before retirement, a fail safe approach lacking for most people let alone the elderly. Perhaps Vanguard could develop that process or at least a check list.