Researchers Study How Con Artists Fool Victims

Lottery pitches focus almost entirely on the size of a phantom prize, while investment fraud pitches involve long or repeated conversations that help the criminal get the personal information needed to profile the victim, the researchers write.

Researchers were surprised to discover that investment fraud victims outscored non-victims on 8 financial literary questions. The fraud victims scored higher even than non-victims who were classified as "likely active investors." The results suggest that financial literacy programs are not sufficient to prevent fraud, according to NASD officials.

Compared with non-victims, investment fraud victims were more likely to be male, married, well-educated and earning a high income.

Investment fraud victims also were more likely to say that they rely on their own experience and knowledge to choose investments instead of conferring with friends, financial advisors, or others.

The researchers conclude that financial literacy programs should be expanded to include information about how fraud criminals' persuasive tactics work.

The researchers also recommend encouraging seniors to report investment fraud to securities regulators, studying the efficacy of persuasion education, and studying consumers' ability to resist to persuasion in different settings.