Three Steps To Avoiding Scams?
There is news article about how to avoid fraud, from Jacksonville, which shows some promise because of its understanding about behavioral economics. How to Avoid Scams
"As the old saying goes, if it sounds too good to be true, it probably is. Some investors in the Jacksonville area have found that out as they tackle the presence of investment schemes. Scammers have expanded their target zones to reach multiple levels of the community.Michael Kirwan, a lawyer at the Foley & Lardner law firm in Jacksonville, has seen this firsthand, representing clients in the business industry for 20 years. He said while some schemes are pitched toward senior citizens, there is also a wide range that is based on any willing investor.
"It's not just the elderly being preyed upon but really the community," Kirwan said."
"The SEC reported certain recurring tactics investors should look out for that set an investment scam apart from a legitimate opportunity.- Phantom Fixation is a tactic that places a prize upfront with the investment, like a vacation or a sum of money.
- Social consensus uses peer pressure to convince investors they need to join by emphasizing the respectable businessmen associated with the investment.
- Scarcity is a tactic many scams use to hurry investors into action "before it's too late." This tactic emphasizes a time-sensitive feature to the investment that is not a reality.
- Reciprocity is a tactic that provokes the investor to take the opportunity as a thank-you to a small favor - a free lunch or savings on a purchase.
How to avoid the fraud
With 20 years of witnessing fraud schemes and their effects on clients, Kirwan said the No. 1 way to avoid the situation is to ask plenty of questions.
"If they [investors] are rushed or do not understand the answers they are given, then they should stop and ask again," he said. Interested investors also need to study brochures and private memos carefully to make sure they know the information back and forth, he said. If everything appears perfect, a third party should listen to the facts as well to make sure that what seems too good is in fact true."
Well, not really. Asking questions may be the right idea: it may however only serve to enhance the confirmation bias.
It depends on what type of questions you are asking, whether cognitive dissonance has already set it.
Perhaps Kirwan said something more useful? Let's ask him.
