Older Investors Are Conned By Financial Frauds

Older investors are more vulnerable to financial frauds as emotion drives their investment decisions, according to the findings of new research by psychologists at Stanford University.

The research found that if older adults (ages 65–85) were "induced" into an emotional state, the chances were higher that they would buy falsely advertised items. On the other hand, younger adults' (ages 30–40) purchase decisions were associated with ad believability.

During the research, participants were asked to view eight different ads designated by the Federal Trade Commission to purposefully be misleading. They were asked to "rate the believability of the content and the likelihood that they would purchase it if cost were not a consideration."

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The findings showed that excitement and anger increased intent to purchase in older adults, while "heightened emotion did not have an effect on younger adults' susceptibility."

The findings also suggest that the older adults were susceptible to fraud irrespective of whether they were in a positive or negative state of emotion.

"This research is a major advance in our understanding of how fraud works. Recognizing the mechanisms of scams helps investors to protect themselves," Gerri Walsh, president of the FINRA Investor Education Foundation, said in a press release.

"Money is emotional, and managing your emotions around financial decisions is critical to avoiding fraud," Walsh added.

The research was funded by the AARP Fraud Watch Network and the FINRA Investor Education Foundation.