Are you a good candidate for a scam?
After pleading guilty to running a pyramid scheme that duped at least 150 of his close friends and relatives, disgraced financial advisor Earl Jones was recently sentenced to 11 years in prison.
Given the opportunity, would you have fallen for his scheme? How do otherwise intelligent people get duped this way?
Knowing a bit about investments, being impulsive, being impressed by authority and living on your own are just a few of the characteristics that help make people susceptible to ponzi schemes and other money-related scams.
Investment fraud victims are also more likely to be male, married, more educated, and have higher levels of income than non-victims, according to the NASD Investor Education Foundation.
Sound like anybody you know?
Those who have become fraud victims identify themselves as being willing to listen to sales pitches from those they do not know and are more willing to attend free seminars on investing.
In other words, they expose themselves to potential frauds more often than others do, NASD says.
They also tend to experience more negative life events (illness, loneliness, financial distress) than non-victims. The theory being that it's the stress of these events that makes them particularly vulnerable to aggressive sales pitches.
Investment fraud pitches use more psychological manipulation techniques in their sales pitches than other cons do. Just like magicians, accomplished hustlers and scam artists understand enough about how the mind works to exploit its vulnerabilities, says Frank Stajano, a security expert at Cambridge University.
Here’s his list of the seven psychological principles used in short cons to part people from their cash. If you find it all a bit dense, click here and here for some real-life street scams courtesy of the BCC television show The Real Hustle.
We like to think that only other people fall for such scams, but that’s clearly not the case. What’s your experience with those who’d like to pick your pocket?
By Gordon Powers, MSN Money