I have had a few clients caught up in scams of the Madoff variety, but fortunately not for large sums. The most common reaction when this happens is embarrassment, that someone who is intelligent could be caught by something that seems so obvious in hindsight. And yet scams continue. Why is that?

There are several reasons:

  • The world is a complex place, and getting more so.
  • It’s tempting to select a pre-packaged, simple solution
  • People who prey on others never look like crooks- otherwise they couldn’t succeed.

Not every scam involves out and out theft. There are what I call soft scams- advising someone to buy the wrong health insurance policy or make an inappropriate investment, when it’s not in the client’s best interest but is in the seller’s best interest. Soft scams can occur when someone presents him- or herself as a trusted, impartial advisor, but is indifferent to the client’s needs or actively trying undermine them.

Why is this a particular problem for older Americans? Two reasons. First, there are many decisions to be made when one reaches the “golden” years. When should I apply for Social Security and Medicare? What kind of supplemental health insurance should I purchase? How shall I invest my retirement nest egg? The fact that this generation of retirees has far more money at its disposal makes it a tempting target. Second, many people are not as mentally acute at 70 as they were at 40, and scammers know this.

Clearly, there isn’t an easy solution to this problem. In fact, it’s likely to get worse before it gets better. What to do? First, take nothing at face value. If someone tells you it’s 3 PM, check your watch. Before you buy something, check it with someone else, preferably someone who has expertise in the matter. Plus, the usual- if someone says you must decide immediately, walk. If someone says it’s a guaranteed winner of whatever kind, check to be sure you still have your wallet. And my favorite, which happens to me every day- if someone calls your home and has disguised their phone number or identity, there’s an 87% chance that it’s a scam.

There are government agencies that can help you if you think you are being or were scammed. Don’t be shy about calling them. And there is continuing discussion by lawyers of ways they can aid the public through pro bono services to combat scams.