The Research Center on the Prevention of Financial Fraud Investor fraud has increased more than 100% since the recession, says Laura Carstensen, founding director of the new Research Center on the Prevention of Financial Fraud, a joint venture of Stanford University's Center on longevity and the FINRA Investor Education Foundation. She talks with contributor Michelle Lodge about the nature of scams, especially those against senior investors, and what advisors can do to protect their clients.

1. What are the most common types of investment fraud involving senior citizens?
Internet frauds. A pitch by email could go like this: "This is a really good investment, in clean energy or oil." The email may say too, that it's a new company starting up, and it looks great, and that the chance to invest is available today only. What is confusing and sounds familiar is that legitimate companies, such as those on QVC and the Home Shopping Network, say the same thing about here today; gone tomorrow. But with investor fraud, sadly, some people end up writing a check for their entire life savings-money they never see again. Another common fraud, which involves less money, is the lottery win from a foreign country. In the email, the reader is asked to send money to a location online so that the "winnings" can be transferred to his or her account in the United States. The types of fraud change daily. Now there are a lot of new scams following gold.

2. Why are investor scams perpetrated on the elderly? And is there a type of senior who may be especially vulnerable?
We don't know if seniors are more susceptible, but they are a target, because that's where the money is. If you're a con man trying to steal money, you don't look to the 20-something set. In general, it happens to people who are open and positive. They read all their mail, even junk mail. They tend not to be on Do Not Call lists to filter unsolicited calls. And when they're on such a call, they engage with the caller. The problem is: The more they stay engaged; the more likely they are to become victims.

Two groups stand out. Investment fraud is perpetrated on white males over 65 who have some finance experience. They think they would never fall for anything, but they are open to fraud. Women over 65, who don't have a lot of outside contact, seem to be more susceptible to lottery scams.

3. Why did your center team up with FINRA and how has that helped?
FINRA has funded the center, supports education about fraud and has a whole infrastructure to get information to individuals and organizations. Gerri Walsh, president of FINRA's investor education foundation, has been very active in dealing with fraud.

4. What's the role of financial advisors in protecting their clients?
Advisors are on the front line. I see advisors as extremely important, because in the advisor the client has a person he or she can trust and who can check out investments to see if they are legitimate.

5. What do advisors need to say to their clients, especially their older clients, about fraud?
For a lot of advisors working with older adults it makes sense to have a conversation with the clients when they are okay about their mental abilities and what should be done if they are unable to make sound financial decisions. It's important to ask, what would that individual want the advisor to do if he or she suspects the client is making wrong decisions? At what point do you bring in another person, the client's adult child, for example? We have been talking here about the fact that investors need a triumvirate, who work together on a senior's investments: It would include the client, a trusted relative and the financial advisor.

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