Archive for the ‘FINRA’ Category

Trick$ of the Trade

Financial Literacy at the Library welcomed Christine Kieffer, Senior Director of the FINRA Investor Education Foundation, to our June meeting.

Christine introduced the FINRA documentary, TRICK$ OF THE TRADE: Outsmarting Investment Fraud, which was followed by an audience Q and A.

The film introduced several of the persuasion tactics that criminals often use to con investors.  Many of these strategies are also common marketing tools.

  • Phantom Riches – also known as empty promises.
  • Source Credibility – using the names of respected individuals or organizations to lend authority and legitimacy. Can easily be faked.
  • Social Consensus – using a social group or religious affiliation to increase your level of comfort.
  • Scarcity – a pressure tactic that this is a short term or rare opportunity.  If we do not act now, our chance for riches will be lost. Similar to tactics used on home shopping channels and department store “one-day sales”.
  • Reciprocity – those “free” luncheon seminars take advantage of our value system which encourages us to give back.  Non-profits that include pre-printed address labels or personalized note pads are using a similar psychology.

To combat persuasion tactics, defend your hard earned money with the following tools:

  • Remember that there is no such thing as a free lunch.
  • Avoid high-risk investments
  • Register for the do not call list.
  • Develop a Refusal Script.  Have a standard response to solicitors such as “I always wait 48 hours (or other longer time frame) before I make financial decisions”. Ask lots of questions and think what is in it for them, not what’s in it for you.
  • Know the details of an investment.  If you can not explain how it works and how it makes money, do not invest in it.
  • Ask and Check.    Always ask “Is this a registered investment and are you licensed to sell this product?  What is your registration number and your phone number?  I will call you back if I am interested”.  Conduct a Broker Check with FINRA or contact the Massachusetts Securities Division at the phone numbers listed on this online directory of licensed finance and insurance professionals.

Try these tools out from to test yourself and your investments.  The Risk Meter  tests your vulnerability to investment fraud and the Scam Meter tests the likelihood that the investment you are considering may be a scam.

Don’t know the difference between a financial planner and an investment adviser?  Read this helpful brochure on Working with a Financial Professional produced by AARP.