Together, the FINRA Investor Education Foundation and Stanford University’s Center on Longevity have launched the Research Center on the Prevention of Financial Fraud. The new research center will supplement work by the government, research groups and law enforcement to better understand how fraud causes Americans to lose money.
Stanford’s Center on Longevity is involved in this project because the elderly are widely victimized for fraud and are indisputably targeted by scammers. However, early findings have discovered that the conventional idea of elderly falling victim to fraud because of weakness is not necessarily the truth. Rather, the elderly are likely targeted because they often have more money. In addition, they are more exposed to the market, exploring new investment opportunities in much the same way that younger generations explore the job market or romantic relationships. More exposure to the market means a greater risk of being the target of stock broker fraud.
According to Laura Carstensen, psychology professor and founding director for the center, an overwhelming number of fraud victims are more than 50 years old.
“Even people who did everything right are finding themselves in situations where those savings are being stolen,” Carstensen says.
The original group of experts that met at Stanford in 2009 to discuss the fraud problem identified consolidating information, communicating research and providing research funding as three main “lines of action” for the center.
One major problem of fraud is that some victims hesitate to report their losses. A leading expert on the subject of fraud and the elderly and part of the Research Center on the Prevention of Financial Fraud, Dough Shadel, said that in an interview conducted of 723 known fraud victims, only around 40 percent freely admitted they had lost money. The remaining 60 percent did not admit to losing money, possibly out of embarrassment, shame or denial.
On November 3-4, the center’s inaugural conference, “The State and Future of Financial Fraud,” will be held in Washington, D.C.