The Financial Industry Regulatory Authority’s Investor Education Foundation teamed up with the University of Minnesota and the Better Business Bureau’s (BBB) Institute for Marketplace Trust to study why some consumers are more vulnerable to financial scams. The results of this two-year research study, Exposed to Scams: Can Challenging Consumers’ Beliefs Protect Them from Fraud?, were released in September.1
Findings from this research can help investors more clearly understand how they may be targeted by scammers and may help them to avoid becoming a victim of fraud.
The research also provides insights to help regulatory agencies, policymakers, financial institutions, law enforcement officials and others to better protect investors and the public from financial scams.
The research study was designed to help answer the question: Why do some people lose money to fraud while others do not? The research was conducted using in-depth interviews with 17 people who filed reports with the BBB Scam TrackerSM Reporting Tool.2 Researchers also conducted interviews with two individuals who had worked for a overseas call center company which schooled them in how to perpetrate fraud by claiming to be employees of the U.S. Internal Revenue Service Investigation Department.
The company they worked for left some 50,000 pre-recorded messages on phones each day and those messages were returned by 20-25 percent of the people who received them.3
Those who responded were “pre-screened targets.” If consumers had heard about the scam prior to the call, they were less likely to become victims. Those who did become victims were fearful of the U.S. government according to the call center employees and felt compelled to pay their alleged tax debt using gift cards obtained at local retailers.
The interviews were conducted by Metro Tribal, LLC, a social insight firm which uses an ethnographic approach. Ethnography is the study and description of group culture and how it affects the way individuals see and interact with the world. Metro Tribal researchers used this approach to uncover interviewee beliefs, values and attitudes that might drive the interviewee’s behavior.
According to the study authors, applied ethnographic work “follows the assumption that humans construct their own sense of reality through social interactions and they respond to the world based on this construction — meaning that we see the world and everything in it through the lens of our experiences and the ways other people explain things to us and these ‘inner stories’ consistently inform our thinking.”4
Based on their interviews, the study researchers defined four mental frames — or default ways of thinking — that determined whether or not people were vulnerable to fraud. The mental frames which made people more susceptible to fraud and financial loss included the following:
Compliance – Believing that authority and institutions yield power over the individual and that authorities can enact sanctions and limit the freedoms of individuals.
Opportunity – Believing that wealth is built on random opportunities and that it is a zero-sum game, with clear winners and losers
Intelligence – Believing that not knowing the answers causes shame and reduces an individual’s status. Perceived lack of intelligence can affect an individual’s sense of power and impact.
Order – Believing that the natural order of things is benevolent and just and that individuals who do good will be rewarded and those who do bad will be punished.
Researchers propose that these mental frames governing compliance, opportunity, intelligence and order may have affected the way that interviewees interpreted what scammers told them and that individuals were more likely to lose money if they believed that:
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- Authority should not be challenged.
- Financial opportunities are a zero-sum game with clear winners and losers.
- The world is organized in a way that rewards good people.
- Asking too many questions can make a person seem ignorant.5
The good news is that research has proven that targeted messages can modify mental frames, helping people to become less vulnerable to financial scams. The simple message that it is actually a sign of intelligence, and a consumer’s right, to ask questions may prevent consumers from becoming victims of fraud.
Financial scams and investment fraud come in many different forms, so it is crucial that as an investor you do your research as well as know your rights. The advice of a securities attorney can help you navigate your concerns about your investments and how they are being managed.
Our Securities Law Firm located I the Detroit area has the knowledge and more than 20 years of experience to help and represent victims of investment fraud, and all aspects of broker abuse. If you have been wrongfully represented by a broker, have questions about the management of your investments or suffered significant economic losses due to stockbroker negligence or financial scam contact us today. Our Michigan securities firm has an excellent track record of success and are here to help.
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1, 3, 4 Exposed to Scams: Can Challenging Consumers’ Beliefs Protect Them from Fraud?
Link: https://www.finrafoundation.org/sites/finrafoundation/files/exposed-to-scams-can-challenging-consumers-beliefs-protect-them-from-fraud.pdf
2 BBB ScamTrackerSM Reporting Tool
Link: https://www.bbbmarketplacetrust.org/story/39089075/bbb-scam-tracker
5 New Research Examines Why Some Consumers Are More Vulnerable to Financial Scams, by Angelita Williams, 9/22/2021
Link: https://www.finra.org/media-center/newsreleases/2021/new-research-examines-why-some-consumers-are-more-vulnerable