Affinity fraud – In this situation salespeople are hired to target specific religious, ethnic, professional or social groups. Once a prominent member of the group invests, more people within the community decide that the product is worthwhile. Having gained the community’s trust, the salesperson then promotes the fraudulent products or services to the group at large.
Bait and switch schemes – Investors should be wary of investments that are advertised as having unusually high returns, especially if a personal visit is required. During the face-to-face meeting, the salesperson will discourage the investor from investing in the advertised product, switching them to a different investment altogether.
Churning – Churning occurs when a securities professional makes unnecessary and/or excessive trades in order to generate commissions. Most churning occurs when an investor grants his or her broker discretion to trade the account on his or her behalf.
Guaranteed returns – Some investors may be enticed by promises of sky-high returns as they attempt to catch up on retirement planning or lost savings. Registered brokers and financial advisers are prohibited by law from guaranteeing a rate of return on securities products.
Free meal seminars – Investors are invited to receive a free meal and hear about investment opportunities. While free meal seminars may be a legitimate method in which to obtain new clients, some seminar salespeople may try to sell you unsuitable investments or convince you to replace your existing investments. They may also fail to disclose their fees or commissions, making it difficult to accurately compare products and services. Others may use these seminars simply to obtain your personal and financial information.
Misleading credentials – Some salespeople or financial advisers create the impression that they have special education or expertise in senior/retirement services. If credentials contain words such as “senior” or “retirement” in conjunction with the words “certified” or “registered”, be cautious. These credentials may be no more than a commercial gimmick. Their specialty may be more about knowing how to “sell” to seniors, and less about what may actually be in their clients’ best interests.