Which profile describes the most common victim of investment frauds like Bernie Madoff’s?
a. Tech-savvy young adult
b. Man over 50 earning high income
c. Elderly widow on fixed income
Widow, you say? That’s the stereotype, said Laura Carstensen, founder of Stanford University’s new Research Center on the Prevention of Financial Fraud.
“The old woman who’s demented and living on her own, and the guy who knocks on her door and sells her the policy – that does exist, but it doesn’t represent older people,” she said. Older people who have a history of long-standing relationships are often better at determining who they can trust, she said.
The correct answer is b: Man over 50 earning high income.
Fraudsters feed successful men’s egos by appealing to their investment savvy, enticing them to get into a deal others might not understand. By building up their egos, a fraudster ensures that the victim isn’t thinking clearly when he agrees to invest, said Doug Shadel, a member of the Stanford Center’s board who co-authored the AARP Foundation National Fraud Victim Study.Learn More
With more college graduates piling up debts, an increasingly popular program on campus is trying to help them stay out of trouble.
More than 600 colleges are now enrolled in the National Endowment for Financial Education’s (NEFE) online program, so they can offer free assistance to four-year and community college students. CashCourse is a sort of private-label personal finance program: each academic institution puts its logo and school colors on NEFE’s online package of cash- and debt-management tools, tips, and workshops.
The University of California, the University of Texas, Purdue University, and State University of New York are among the schools posting NEFE’s materials to their websites or customizing financial programs to meet their students’ unique needs.
“We want every school to figure out what works for them,” said Ted Beck, NEFE’s chief executive.
Leticia Gradington, program director for Kansas University’s program, said it’s not unusual for students to have $20,000 to $30,000 in college loans and credit card debts.
“You’ve got students every day who are worrying about how they’re going to pay their debt back,” she said. If students can learn just how expensive the debt is before they borrow, “They pay more attention to it.” …Learn More
The Journal of Marketing Research (JMR) will devote a special issue to interdisciplinary research on the hot topic of financial decision–making and behavior.
The issue is a smorgasbord of 15 articles on behavioral, marketing, economic, and psychological research on various financial activities, from borrowing money to establishing trust in financial transactions.
The November issue’s guest editor-in-chief, John G. Lynch, a psychologist who “wandered into marketing and consumer decision-making,” said the interdisciplinary approach advances everyone’s understanding of complex financial decisions.
“A given field understands a part of the answer. But we’re missing the larger whole,” he said. The special issue “would bring people together to read each other’s work and have an effect of causing more cross-fertilization.”
Squared Away plans to cover some JMR articles in a series of blog posts in coming weeks. Here’s a preview: …Learn More
I keep bumping into Tim Maurer’s videos – he’s an active tweeter – and decided to share the fun. This Baltimore financial planner’s clients include a lot of 30-somethings, so he produced a series of humorous 90-second videos that knock down the barriers to understanding the basics of various personal finance topics.
With many people either returning from or heading out on vacation this week, he suggests in this video how to eliminate the anxiety around spending money on trips.
A centuries-old trend of retiring at an earlier and earlier age has completely reversed, concluded a July report by the TIAA-CREF Institute.
In 1910, men didn’t retire until they were about 73 but that dropped to age 63 by the mid-1980s, the golden era for generous union- and employer-sponsored pension plans. Then the retirement age and labor force participation ages started heading back up, according to TIAA-CREF’s report, “Early Retirement: The Dawn of a New Era?” Women experienced a similar though less dramatic trend.
The report provided numerous explanations for this, including the demise of the mandatory retirement age for most American workers; the improved health of older Americans; and technology that has created options about when and where they work. Many retirees go from full-time work to part-time “bridge” jobs.
But what about the economic and cultural forces that have left baby boomers, myself included, financially unprepared for retirement? Delay for us isn’t a choice but a financial imperative. …Learn More
Stockbrokers and financial advisors typically focus on the mechanics of investing – the dividend, the strategy, or past performance. When they do, investors often become overwhelmed by the conversation.
To break through that and improve their comfort level, investors should instead focus on the more important issue at hand: the credentials and character of the person peddling those investments, said Tamar Frankel, a law professor at Boston University.
“I want to shift the focus from what is being sold to who sells it,” she said.
An expert in financial regulation and fiduciary law, Frankel’s latest research examines the role of trust in various professional relationships, including the relationship between a broker or advisor and his or her client or potential client.
Frankel’s basic premise is that no question is a stupid question. Since brokers and investment advisors are not regulated by the same fiduciary standards that govern, say, employer pension funds, investors must protect themselves.
That can be difficult to do when the broker is throwing around unfamiliar terms. She recommends investors come armed – with questions – to their meetings with brokers. She has put together a deceptively simple list of questions. If the broker refuses to answer a question – his or her right – then the investor has already learned something important.
Here are three of Frankel’s 15 questions and her thinking behind them.
Question: “Are you a registered investment advisor, registered broker dealer, or both?”
Rationale: Frankel’s message here is: assume nothing. Investors should be certain that the investment advisors or brokers being considered meet the professional standards established by their own profession. Even better, check out their credentials beforehand but ask the question anyway. … Learn More
All the headlines about “financially illiterate” Americans miss something important. The language financial professionals use can be incomprehensible.
In this humorous video, David Saylor, whose job is basically “word consultant” for Invesco Van Kampen Consulting, walked around downtown Chicago and asked people to define industry terms such as “dollar-cost averaging” and “beta.”
One person got one answer right. (After watching the video, readers may need to consult Saylor’s glossary, below.) Even a seemingly simple concept – “transparent fees” – was misinterpreted. It means that fees are fully disclosed but was interpreted to mean “invisible.”
No wonder people are confused by the “Finglish” – financial English – thrown around by their mutual-fund companies, 401(k) managers, and other investment professionals, Saylor said.
His work also explores the subtle distinctions people make when the industry attempts to use familiar terms, such as “guarantee” or “nest egg.” …