How to Identify and Avoid Investment Fraud, Rollover Scams

Scammers have nearly perfected the art of bringing unsuspecting people into their confidence and then defrauding them of hard-earned retirement resources. Many begin their investment fraud schemes by contacting everyday people with seemingly valid reasons to invest in their proposals. Our valued elders are particular targets, and they suffer upwards of $3 billion each year from financial exploitation.

That’s why it’s of critical importance for everyday Americans to remain vigilant about investment fraud in all its forms. These are prevalent methods scams con artists use and how to identify them.

How to Recognize and Defend Against a Self-Directed IRA Scam

Self-directed IRAs are like the low-hanging fruit to fraudsters. That’s generally because scammers understand that trustees are limited in ways they protect and follow-up on investments. These IRAs often include alternative investments such as real estate, promissory notes, and private securities, among others. Many are not publicly traded, and that limits transparency. Believing self-directed resources may be vulnerable, a clever IRA scam may use the following methods to perpetrate fraud.

  • Misrepresentations: A common scheme is to make investors believe that the IRA custodian will conduct due diligence. Many self-directed IRA agreements state the custodian has no such responsibility. Once the revenue is moved, it’s lights out.
  • Alternative Investment Fraud: Self-directed IRA investors commonly work with non-publicly traded securities with limited information. Fraudsters count on their investment scam not being thoroughly vetted to get unsuspecting people to funnel money into it.  

These types of scams have been highly successful due to their seemingly lucrative and secure potential return on investment. But there are ways to identify attempts at fraud such as the following.

  • Independently verify information such as price, reported returns, and asset value.
  • Reject unsolicited investment promotions that include transferring IRA money.
  • Ask if the person promoting the opportunity is licensed.
  • Ask if the investment is registered.
  • Verify background information with the SEC.
  • Work with a licensed professional when selecting alternative investment opportunities.

While a self-directed IRA scam can be sniffed out with some due diligence, there are numerous sophisticated types of investment fraud that can be more difficult to identify. The rollover scam ranks high among them.

How to Identify and Defend Against a Rollover Scam

Fraudsters like to target retirement benefits because they know that investors are often unsatisfied with how much they’ve squirreled away for their golden years. Promoting higher yields can be very enticing for everyday people who are not investment professionals.

The rollover scam basically utilizes a seemingly legitimate business to lure investors. You may be contacted by email, an app, or standard mail about an opportunity. These unethical companies persuade people nearing retirement age to transfer their wealth into a less secure investment on the promise of big returns. But when the annuity you purchase is worth less than the price tag, it’s likely a scam.  

In order to avoid a rollover scam, investors are advised to work with a credible investment professional with an established reputation. It’s also essential to conduct thorough due diligence on the value of items such as annuities and be sure you are getting sound value. The rollover scam ranks among the most dangerous to a retirement account because the company promoting the investment may appear legitimate on the surface.

We hope these investment fraud tips prove helpful to our valued community members. If you see an opportunity that looks too good to be true, call a reputable investment professional, and get sound advice.

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