Consumers reported losing nearly $9 billion to fraud in 2022 — a 30% increase from the year prior.
And those are just the incidents that are reported. In fact, some reports suggest that the actual amount is closer to $40 billion!
One thing every report seems to agree on is that scams are becoming more prevalent and more sophisticated.
So, to help protect retirement investors from becoming victims, today I’m sharing the top three financial scams to watch out for.
I’m also providing actionable tips for protecting yourself (and your loved ones) from each scam.
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Episode Resources
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- Stay Wealthy Episodes Mentioned:
- Other Resources Mentioned:
- Telemarketers Documentary [HBO]
- Consumers Lost Nearly $8.8 Billion to Scams in 2022 [FTC]
- 2022 U.S. Spam and Scam Report [Truecaller]
- Check U.S. Advisors via FINRA and SEC:
- How to Stop Spam Text Messages on iPhone and Android [Avast]
- How to Filter Text Messages on iPhone [Apple]
- America’s Most Common Text-Messaging Scam [CBS]
- How to Recognize and Report Spam Text Messages [FTC]
- The Top Text Scams of 2022 [FTC]
- How to Stop Spam Calls for Good [Clark Howard]
- Utility Collection Scam [Twitter]
- What is a Custodian [Investopedia]
- Fidelity Investments – Safeguarding Your Accounts [Fidelity]
Episode Transcription
3 Financial Scams to Watch Out For in 2023
Taylor Schulte: According to the FTC, consumers reported losing nearly $9 billion to fraud in 2022, a 30% increase from the year prior.
And those are just the incidents that are reported.
Some studies suggest the actual amount lost to scams last year is closer to $40 billion dollars across 70 million Americans.
One thing every report seems to agree on is that scams are becoming more prevalent and more sophisticated.
In fact, my wife and I just finished the new documentary on HBO Max called “Telemarketers.”
The series was filmed over a 20-year time period by two employees of a major telemarketing call center in New Jersey, and the documentary is their attempt to expose the entire industry.
The model is simple: the telemarketers call local civilians on behalf of real nonprofit organizations – organizations that appear to support the local police or fire departments.
The money collected does, in fact, go to the organization they’re calling on behalf of, but only about 10% goes to the stated cause. The other 90% goes into the pockets of the non-profits executives and staff – the very people who hired the telemarketing company to help them raise funds.
I don’t want to spoil the show for those interested in watching, but in short, the company these filmmakers worked for is widely known for running one of the biggest telemarketing scams in American history. The company was ultimately shut down in 2010 and the owners were ordered to pay $19 million, the largest ever civil penalty in an FTC consumer protection case. However, no criminal charges were filed and the owners didn’t receive any jail time.
While the original, simple version of the scam still exists today, more sophisticated AI-enabled versions have taken it to a new level. And, unfortunately, the organizations running these phone scams regularly disappear and reappear under different names, making it nearly impossible to track them down and even more impossible to recover dollars after they’re donated.
Between AI and the entrance of unregulated Political Action Committees, telemarketers on the inside have confirmed the current trend we’re seeing in the FTC’s reports – that it’s worse now than ever before. More calls, more money, and even less regulation.
Welcome to the Stay Wealthy podcast! I’m your host Taylor Schulte and today and I’m sharing information about the top 3 financial scams to watch out for right now.
I’m also sharing actionable tips for protecting yourself (and your loved ones) from each of the different scams.
For all the links and resources mentioned today, just head over to youstaywealthy.com/198.
Before we dive into today’s episode, I just wanted to quickly thank Jeremy Schneider for guest hosting the show this past month. As he mentioned, this was the third summer he’s offered to take the microphone from me and I’m incredibly grateful for his generosity and commitment to putting good information into the hands of retirement savers around the world.
There’s a reason why Jeremy has built a very loyal following of over 500,000 people in just a few short years, and it’s not just because he’s had financial success at a young age. He’s smart, generous, and has a unique gift of teaching personal finance in multiple formats, most notably his hand-crafted finance graphics he regularly posts on social media.
If you haven’t already checked out his work, I highly recommend it. You can visit tpersonalfinanceclub.com to learn more about his online community and courses and/or follow him on Instagram @personalfinanceclub.
Last year on the podcast, I shared a story about my personal involvement in an attempted scam that occurred over 10 years ago. My grandfather fell victim to the very popular grandparents scam, where a person called him pretending to be me (his grandson), told him I was in trouble, and asked him to send cash.
Fortunately, we were able to recover the envelope of cash from the post office before it was shipped off to the scammers, but, naturally, it spooked him (and all of us) pretty good.
These scams are often referred to as imposter scams, and once again, unfortunately, the imposter scam recently hit close to home.
The following is one of several emails I received last year from overseas victims who were scammed by someone pretending to be me:
Hi Taylor,
I live in Melbourne Australia and have been scammed by a guy impersonating you. He is part of a Trading platform called Globe Exchange. It's a fraudulent company that has scammed me out of $69,000 and wanted to let you know. I work for an American Company called Motorola Solutions and wanted to inform you, in case we can help others avoid getting scammed by this same person.
And here’s one from the actual impersonator that was shared with me by one of the other victims I heard from:
Dear Mrs. Catherine,
Hope my email finds you well. Thanks for signing up with Globe Exchange and welcome on board! Let me introduce myself, my name is Taylor Schulte and I will be your point-of-contact and certified advisor. Recently I have tried to get in touch with you but unfortunately couldn't reach you. Please let me know a convenient time for me to call you. Thank you in advance!
The impersonator even used my headshot in his email signature. It was unsettling to say the least.
I’ve exchanged a number of emails with victims, all whom are in the UK or Australia, collected as much information as I could, and spoken with financial advisors in these countries to learn more about this scam and the company behind it.
In the end, all I could do on my end to help was report the information I had to the SEC and the FBI, and suggest that overseas victims report the incident to their local authorities. Unfortunately, as noted earlier, it’s almost impossible to track these people down, and even more impossible to recover lost funds.
I feel awful. And since I've done all I can do on my end to help these victims and prevent this person from continuing to impersonate me (and other financial professionals), I figured the only thing left is to continue to educate and help prevent others from falling victim to similar scams and new ones popping up.
In fact, according to the 2022 FTC fraud report, imposter scams and investment scams took a combined $6.2 billion dollars from innocent Americans last year. That amounts to almost 70% of the total losses reported and is double the losses reported in 2021. And again, that’s only what has been reported to the FTC, so the actual amount is likely much higher.
To protect yourself from an investment scam similar to the personal story I just shared, there are three important things I recommend everyone do as it relates to hiring and working with a financial advisor or making an investment:
1. Verify the identity of the financial advisor you are considering hiring or investing with. Every licensed financial advisor in the U.S. has what’s known as a CRD number. Mine is 5371615. Every registered investment firm also has a CRD number. My firm’s is 286648. You can enter these numbers into FINRA’s broker check website or the SEC’s public disclosure website, both of which I’ll link to in the show notes.
In addition to verifying the identify of a financial professional and confirming they are properly licensed, you can also review their background and any client complaints or lawsuits they’ve been involved in. Unfortunately, it’s not uncommon for some financial advisors to have dozens of serious client complaints and lawsuits filed against them and still be able to continue operating legally as a financial advisor.
In other words, just because someone has the proper licenses and you’ve verified their identity, doesn’t necessarily mean they have a clean background and is someone you would want to trust with your money.
#2, my second suggestion is to…
1. Verify they are the person they say they are on the phone (or who their email signature says they are).
Approximately 50% of the amazing families we serve live outside of California, with a high percentage of them living in the midwest and east coast. Working with a financial advisor in another state or city is increasingly common these days, allowing retirement investors to work with an advisor they like and trust and who specializes in helping people in their exact situation.
What’s not very common is for the advisor to refrain from showing his or her face. In many investment scams, especially investment scams where there is an imposter, victims report never seeing the scammers face. The scammer either insists on communicating via phone and email only or pretends to have camera issues when a virtual meeting was requested.
It sounds obvious, but scammers are brilliant at overcoming objections and can be very convincing.
2. Verify that they work for a reputable bank, broker/dealer, or if the advisor is independent, verify they use a third-party custodian. A third-party custodian safely holds and safeguards client investment and retirement accounts. They also provide important insurance such as FDIC and SIPC – or Securities Investor Protection Corporation.
Bernie Madoff did not use a third-party custodian. When people invested with him, they sent their checks to Bernie for him to personally deposit and safeguard. We all know how that story ended. While there are no shortage of third-party custodians out there, the top three used by independent financial advisory firms are Fidelity, Charles Schwab, and Pershing.
My firm personally uses Fidelity, and I can tell you from personal experience that Fidelity will not tolerate or maintain relationships with financial advisors or advisory firms who have checkered pasts or break legal and compliance rules. My firm isn’t compensated by Fidelity and we aren’t employees of their company but they certainly don’t want us tarnishing their brand reputation and the trust they’ve built with 43 million Americans.
So, while confirming that your financial advisor uses a reputable third-party custodian isn’t the be all end all, it’s still a critical step in your screening process. A step that would have prevented those overseas victims from sending money to an imposter using my name who claimed to work for a bank that, to my knowledge, doesn’t exist.
To recap, the three things you can do to protect yourself from an investment scam or from a fraudulent financial advisor are:
1. Verify the identity of the financial professional. I’ll link to the two websites I mentioned in today's show notes that allow you to look up every licensed advisor in the U.S.
2. Verify the person is who they say they are. Demand an in-person meeting or a virtual meeting with cameras turned on and do not invest with anyone based on a phone call or email exchange.
3. Verify that they work for a reputable bank or broker/dealer or, if they’re an independent firm like mine, they use a reputable third-party custodian. Again the top three used by independent firms are Fidelity, Schwab, and Pershing.
The second scam I want to share with you today that’s becoming more prevalent and getting more and more sophisticated is known as the Utility Collection Scam – another version of an imposter scam.
Here’s how the utility collection scam works.
A person pretending to call from your local power company calls you and says you have an outstanding balance due. They address you accurately by your first and last name and often have accurate records of your historic home addresses.
It’s not uncommon for them to say they’re collecting an outstanding balance on a home you lived in 10 years ago. They’ll say that they’re calling customers as a courtesy before sending the balances over to collections.
If you get suspicious and challenge them, they’ll give you an employee ID number and the company phone number, telling you that you can go ahead and call back if you don’t believe them.
They do this because, as I’ve shared in the past, one well-known tip to avoid getting scammed is to hang up on the potential scammer and call the company back that they are calling on behalf of to verify the legitimacy. Since this has gained in popularity, the utility collection scammers quickly give you what appears to be legitimate company information, including their employee ID number and the company phone number if you want to go ahead and hang up and call back.
Now, the phone number is not the official phone number for the utility company. It’s a fake number that goes straight back to the company operating the scam. However, when you call the number, the recording you are routed to is a mirror image of the actual utility company's phone recording, with the exact same menu options to choose from.
One potential victim went ahead and called the number back, selecting option 1 to get routed to collections, and was immediately asked for his utility account number. When asked if it was as scam, the person on the other end of the phone said with confidence, “if you think this is a scam, come by our office.”
While the person sharing this story didn’t fall for it, many people will, especially elderly Americans who are often the ones being targeted.
One obvious solution to avoid falling victim to imposter scams like this one is to simply not pick up your phone if you don’t recognize the number. Similarly, you can hang up if you’re ever asked for sensitive information, look up the company's registered phone number, and call back to verify the legitimacy of the call you just received.
But for those who want to take additional precautions for themselves or loved ones in their life, there are three additional steps you can take:
1. Register all of your phone numbers with the National Do Not Call Registry. While not perfect, it’s still a worthwhile step if you haven’t done it already.
2. Check with your phone carrier and inquire about free spam call blocking. Most carriers offer some version of basic free protection as well as paid features available as an upgrade. Most of the paid upgrades aren’t more than $3-$4 per month.
3. Consider a paid spam-blocking app if too many spam calls are still getting through. TrueCaller, Robokiller, and Mr. Number are three highly-rated apps to consider that I’ll link to in the show notes.
Lastly, the third type of scam that continues to get more sophisticated and took victims for over $300 million in 2022 are text message scams. Similar to imposter scams, the median loss for text message scams was $1,000/person last year, 5x the median losses reported in 2019. This increase makes sense given the rise in the adoption of text messaging, especially among older Americans.
In fact, text messaging is pretty much the only way I can get in touch with my 90-year-old non-tech-savvy grandmother these days. She’ll rarely answer her phone, but she will respond to every text within minutes. It’s concerning to think who else might be texting her and what she might be responding to.
But elderly Americans aren’t the only ones falling for these text message scams given they’re still relatively new and not talked about as much as the more traditional scams we’re all aware of.
The most popular text messaging scam going around right now is often referred to the “copycat bank fraud prevention alert.” Reports about texts impersonating banks are up nearly 20x since 2019 and here’s how it works.
You’ve probably received a text from your bank or credit card company at some point asking you to validate a recent charge – a legitimate text about an actual charge on your credit card. I just got one last week from American Express validating a purchase I made was in fact made by me. Like most of these texts, Amex asked me to confirm by responding with 1 for yes or 2 for no.
In situations where this is a scam, it doesn’t matter if you respond YES or NO, you’ll immediately be connected to a fake fraud department by phone or a fake fraud department will immediately call you. Once they have you on the phone, they’ll, of course, start by asking for basic information like your name and address, and then slowly try to pull more sensitive information out of you like your account number, credit card number, and even your social security number.
While the bank fraud prevention alert texts seem to be the most prevelant at the moment, text message scammers are getting more clever with “free gift” texts inviting you to click a link and pay a small shipping fee to receive a free gift. Or texts that appear to be from FedEx or UPS telling you there’s a problem with a recent delivery and instructing you to click a link to resolve it. The website you’re taken to looks legit and victims report to providing sensitive information, including social security numbers.
In all these cases, the simple solution is to avoid responding. In fact, I don’t even respond to legitimate texts, like the one I just received from Amex. It was an actual charge, the charge already went through, and I know Amex (or the Vendor) would contact me again and in a different way if there was truly an issue. I also know that I can contact Amex directly by phone if I’m concerned or want to validate something.
So, I just avoid responding to any text messages at all, and would suggest everyone do the same. But I’m not convinced my 90-year-old grandmother can avoid responding to all text messages, and if she hasn’t interacted with a scammer already, I’m concerned that one day the wrong person will get to her.
Short of regularly reminding her to refrain from responding to these common scams and someone monitoring her text messages, the only other options to protect her and others who might be at risk are:
1. Change the settings to only allow texts from phone numbers associated with existing contacts and block everything else. I’ll link to an article explaining how to do this in today’s show notes.
2. Similar to last scam we reviewed, you can also pay for a text blocking app to further help prevent spam texts. Calls Blacklist is a popular one for Android phones that helps block both calls and texts and Hiya and TrueCaller are two popular ones for iPhones that have similar functionality.
In addition to all of the tactics I shared today to help protect yourself and loved ones against these increasingly sophisticated scams, the one thing that everyone listening should do immediately after finishing today’s episode is to freeze your credit. If you were to ever fall victim to a scam or someone got their hands on your personal information, they wouldn’t be able to open accounts in your name or take out any loans.
Similarly, you wouldn’t be able to either and would be required to unfreeze your credit if you ever needed to obtain a loan or open a new credit account in your name.
The analogy I’ve used in the past here on the show is that credit monitoring services like Credit Karma and Lifelock are akin to installing an alarm system in your home. They alert you AFTER someone has already broken in. Freezing your credit, on the other hand, is like installing a deadbolt on your doors, preventing someone from getting in.
Everyone should have their credit frozen. It’s a slight inconvenience to unfreeze it when needed, but the inconvenience is well worth it. And it’s become so much easier now that everything is app-based. I can freeze and unfreeze my credit with all three major credit bureaus with the tap of a few buttons on my smartphone.
So, if you haven’t tackled this, and you want to learn more, I’ll link to a couple of great resources in today’s show notes which can again be found by going to youstaywealthy.com/198.
I truly hope you found today’s episode helpful. This topic is not as entertaining as Roth conversions, social security optimization strategies, and smart investing strategies, but it’s equally, if not more important.
It’s hard to keep up with the latest trends and sophisticated techniques being used, so please do reach out and let me know if you’ve experienced something or read about something that you think our listeners should know about.
In addition, please reach out and let me know if you have any follow-up questions or suggestions for a future episode. As always, you can email me at podcast@youstaywealthy.com. That’s podcast@youstaywealthy.com.
Thank you, as always for listening, and I will see you back here next week.
Episode Disclaimer: This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.