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According to the FTC, consumers reported losing nearly $9 billion to fraud in 2022, a 30% increase from the year prior. And those are just the incidents that are reported. Some studies suggest that the actual amount lost to scams last year is closer to $40 billion across 70 million Americans. One thing that every report seems to agree on is that scams are becoming more prevalent and more sophisticated.
My wife and I just finished the new documentary on HBO Max called Telemarketers. The series was filmed over a 20-year time period by two employees of a major telemarketing call center in New Jersey, and the documentary is their attempt to expose and take down the entire industry. The model was simple. The telemarketers would call local civilians on behalf of real nonprofit organizations, organizations that appear to support the local police or local fire department.
The money collected did in fact go to the organization that they were calling on behalf of, but only about 10% would go to the stated cause. The other 90% would go into the pockets of the nonprofit executives, the very people who hired the telemarketing company to help them raise money in the first place.
I don't want to spoil the show for those who are interested in watching, but in short, the company these filmmakers work for is widely known for running one of the biggest telemarketing scams in American history. The company was ultimately shut down in 2010 and the owners were ordered to pay $19 million, the largest ever civil penalty in an FTC consumer protection case at that time. However, no criminal charges were filed and the owners did not receive any jail time.
While the original simple version of that scam still exists today, more sophisticated AI-enabled versions have taken it to a whole new level. And unfortunately, the organizations running these phone scams regularly disappear and reappear under different names, making it nearly impossible to track them down and even more impossible to recover dollars after they've been donated. Between AI and the entrance of Unregulated Political Action Committees, or PACs,
Telemarketers on the inside have confirmed the current trend that we're seeing in the FTC's reports, that it's worse now than ever before. More calls, more money, and even less regulation.
Welcome to the Stay Wealthy Podcast. I'm your host, Taylor Schulte, and today I'm sharing information about the top three financial scams to watch out for right now. I'm also sharing actionable tips for protecting yourself and your loved ones from each one. For the links and resources mentioned today, just head over to youstaywealthy.com forward slash 198.
Last year on the show, you might remember, I shared a story about my personal involvement in an attempted scam that occurred just over 10 years ago. My grandfather, he fell victim to the very popular grandparent scam where a person called him pretending to be me, his grandson, told him I was in trouble, and then asked him to send cash to a very specific address.
Fortunately, we were able to recover the envelope of cash from the post office before it was shipped off to the scammers. But as you can imagine, it spooked him and spooked all of us pretty good. These scams are often referred to as imposter scams. And unfortunately, once again, the imposter scam has hit close to home.
The following is one of several emails that I've received in the past year from overseas victims who were scammed by someone pretending to be me. Here's the email. Hi, Taylor. I live in Melbourne, Australia, and I've been scammed by a guy impersonating you. He's part of a trading platform called Globe Exchange. It's a fraudulent company that has scammed me out of $69,000, and I wanted to let you know.
I work for an American company called Motorola Solutions, and I wanted to inform you in case we can help others avoid getting scammed by the same person. Speaking of the same person, here's one from the actual impersonator that was shared with me by one of the other victims that reached out.
Dear Mrs. Catherine, hope my email finds you well. Thanks for signing up with Globe Exchange and welcome on board. Let me introduce myself. My name is Taylor Schulte and I will be your point of contact and certified advisor. Recently, I've tried to get in touch with you, but unfortunately couldn't reach you. Please let me know a convenient time for me to call. Thank you in advance.
The impersonator even used my headshot in his email signature. It was unsettling to say the least. I've exchanged a number of emails with victims, all who are in the UK or Australia. I've collected as much information as I could. I've even spoken with financial advisors in these countries to learn more about the scam and the company behind it.
In the end, all I could do on my end to help was report the information to the FBI and the SEC and suggest that these overseas victims report the incident to their local authorities as well. Unfortunately, as noted earlier, it's almost impossible to track these people down and even more impossible to recover lost funds.
I feel awful. And since I've done all I can do on my end to help these victims and prevent this person from continuing to impersonate me and other financial professionals around the world, I figured the only thing left is to continue to educate and help prevent others from falling victim to similar scams as well as new ones that are popping up.
In fact, according to the 2022 FTC fraud report, imposter scams and investment scams took a combined $6.2 billion from innocent Americans last year. That amounts to almost 70% of the total losses reported and is double the losses reported in 2021. And again, that's only what's been reported to the FTC. So the actual amount is likely much higher.
To protect yourself from an investment scam, similar to the personal story I just shared, there are three important things I recommend everyone do as it relates to hiring and working with a financial advisor or just simply making an investment with somebody. The first is to verify the identity of the financial advisor that you are considering hiring or investing with. Because you see, every licensed financial advisor in the U.S. has what's known as a CRD number. My CRD number is 537-1615.
Every registered investment firm or advisory firm also has a CRD number. My firm's number is 286-648. You can search the advisor, you can search their firm or enter those numbers into FINRA's broker check website or the SEC's public disclosure website, both of which I'll link to in the show notes. And
In addition to verifying the identity of a financial professional and confirming that they are properly licensed, you can also review their background and any client complaints or lawsuits that they've been involved in.
Unfortunately, it's not uncommon for some financial advisors to have dozens of serious client complaints and lawsuits filed against them and still be able to operate legally as a financial advisor. In other words, just because someone has the proper licenses and you've verified their identity doesn't necessarily mean that they have a clean background and might be someone that you want to trust your money with.
Number two, the second suggestion here is to verify that they are the person they say they are on the phone or who their email signature says they are.
Approximately 50% of the amazing families that my firm works with lives outside of California with a high percentage of them living in the Midwest and the East Coast. Working with a financial advisor in another city or state is increasingly common these days. It allows retirement investors to work with an advisor that they like and trust and specializes in helping people in their exact situation.
What's not very common is for the advisor to refrain from showing his or her face.
In many investment scams, especially investment scams where there is an imposter involved, victims report never seeing the scammer's face. The scammer either insists on communicating via phone and email only or pretends to have camera issues when they're on a virtual meeting. It sounds obvious, but scammers are brilliant at overcoming objections and they can be very convincing in these situations. So be sure to verify that they are the person they say they are.
Lastly, number three, verify that they work for a reputable bank, broker dealer, or if the advisor is independent, verify that they use a reputable third-party custodian. A third-party custodian safely holds and safeguards client investment and retirement accounts. They also provide important insurance like FDIC and SIPC.
Bernie Madoff did not use a third-party custodian. When people invested with him, they sent their checks to Bernie for him to personally deposit and, quote, safeguard.
We all know how that story ended. While there are no shortage of third-party custodians out there, the top three used by independent financial advisory firms are Fidelity, Charles Schwab, and Pershing. My firm personally uses Fidelity, and I can tell you from personal experience that Fidelity will not tolerate or maintain relationships with financial advisors or advisory firms who have checkered paths or break legal and compliance rules.
My firm and others, we aren't compensated by Fidelity. We aren't employees of their company, but they certainly don't want us tarnishing their brand reputation and the trust that they've built with 43 million Americans. So while confirming that your financial advisor uses a reputable third-party custodian isn't the be-all end-all, it's still a critical step in your screening process.
A step that would have prevented those overseas victims from sending their money to an imposter using my name who claimed to work for a bank that, to my knowledge, does not exist.
So to recap, the three things you can do to protect yourself from an investment scam or from a fraudulent financial advisor are number one, verify the identity of the financial professional. Again, I'll link to the two websites I mentioned in today's show notes that allow you to look up every licensed advisor in the U S number two, verify that they are who they say they are demand an in-person meeting or a virtual meeting with cameras turned on and do not invest with anyone based on a phone call or email exchange.
Lastly, number three, verify that they work for a reputable bank or broker dealer, or if they're independent like us, they use a third party reputable custodian. Again, the top three used by independent firms are Fidelity, Schwab, and Pershing. The second scam that I want to share with you today that's becoming more prevalent and getting more and more sophisticated is known as the utility collection scam. This is another version of an imposter scam, and here's how it typically works.
A person will pretend to call you from your local power company or utility company and say that you have an outstanding balance due. They'll address you by your first and last name, and they often have accurate records of your current home address and historic addresses. It's not uncommon for them to say that they're collecting an outstanding balance on a home that you lived in five or even 10 years ago. They'll say that they're calling customers as a courtesy before sending the balances over to collections. And
And if you get suspicious and challenge them, they'll quickly give you an employee ID number and the company phone number telling you that you can go ahead and hang up and call back if you don't believe them. And they do this because, as I've shared in the past, one well-known tip to avoid getting scammed is to hang up on the potential scammer, look up the company that they say that they're calling on behalf of, look up the phone number, and call them back to verify the legitimacy.
And since this tactic has gained in popularity, these utility collection scammers are trying to get ahead of it. And they're quickly giving you what appears to be legitimate company information, including an employee ID number and a company phone number, suggesting that you can go ahead and hang up and call them right back.
Now, the phone number they give you is, of course, not the official phone number for the utility company. They're hoping that you don't go look that up and that you trust what they say. It's a fake phone number that goes straight back to the company operating the scam. However, if you do call that number back, the recording that you're routed to is a mirror image of the actual utility company's phone recording with the exact same menu options to choose from. So it sounds legitimate.
And one potential victim shared his story, and he said that he went ahead and called the number back. He selected option one to get routed to collections, and he was immediately asked for his utility account number. When he asked if it was a scam, the person on the other end of the phone said with confidence, if you think this is a scam, come by our office and hung up. Now, while the person sharing the story didn't fall for any of this, many people will, especially elderly Americans who are often the ones being targeted.
Of course, one obvious solution to avoid falling victim to imposter scams like this is to simply not pick up your phone if you don't recognize the phone number. Similarly, you can hang up if you ever ask for sensitive information, look up the company's registered phone number, and call back to verify the legitimacy of the call you just received.
But for those who want to take additional precautions for themselves or loved ones in their life, there are three additional steps you can take. Number one is to register all of your phone numbers with the National Do Not Call Registry. And while it's not perfect, it's still a worthwhile step if you have not done this already with all of your phone numbers.
Number two is to check with your phone carrier and inquire about free spam call blocking. Most carriers, Verizon, AT&T, most of them offer some version of basic free protection as well as paid features that are available as an upgrade. Most of these upgrades aren't more than $3 to $4 per month, so it's worth checking with your phone carrier to see what options they provide.
And then lastly, you can consider a paid spam blocking app if too many spam calls are still getting through. Truecaller, RoboKiller, and Mr. Number are three highly rated apps to consider that I'll link to in the show notes.
Lastly, the third type of scam that continues to get more sophisticated and took victims for over $300 million in 2022 are text message scams. Similar to imposter scams, the median loss for text message scams was $1,000 per person last year. This was phenomenal.
five times the median losses reported in 2019. And this increase makes sense given the rise in the adoption of text messaging, especially amongst older Americans. In fact,
Text messaging, believe it or not, is pretty much the only way I can get in touch with my 90-year-old non-text-savvy grandmother these days. I'm not kidding you. She'll rarely answer her phone, but she will respond to every text message within minutes. And it's concerning for me to think about who else might be texting her and what she might be responding to.
But elderly Americans are not the only ones falling for these text message scams, given that they're all still relatively new and they're not talked about as much as the more traditional phone scams that we're all mostly aware of.
The most popular text messaging scam going around right now is often referred to as the copycat bank fraud prevention alert. Reports about texts impersonating banks are up nearly 20 times since 2019. And here's how it works. You've probably received a text from your bank or credit card company at some point asking you to validate a recent charge. It's
It's a legitimate text from your financial institution asking you to validate an actual charge on your credit card. I just got one last week from American Express asking me to validate a purchase that I made. And like most of these texts, Amex asked me to confirm by responding with the number one for yes or the number two for no.
Now, in situations where this is a scam, it doesn't matter if you respond with yes or no, you'll immediately be connected to a fake fraud department by phone or a fake fraud department will immediately call you. And once they have you on the phone, they'll of course start by asking you for basic information like your name and address, and then slowly try to pull more sensitive information out of you like your account number, credit card number, and even your social security number.
While the bank fraud prevention alert texts seem to be the most prevalent at the moment, text message scammers are getting more clever with these free gift texts inviting you to click a link and pay a small shipping fee to receive a free gift.
or texts that appear to be from FedEx or UPS telling you that there's a problem with a recent delivery and instructing you to click a link to resolve it. The website that you're taken to, it looks legit, and victims report to providing very sensitive information on these websites, including social security numbers. Now, in all of these cases, of course, the simple solution is just to avoid responding. In fact, personally, I don't ever respond to legitimate texts like the one that I just received from American Express.
It was an actual charge that they were asking about. The charge already went through. And I know that American Express or the vendor would contact me again, probably more formally if there was truly an issue. I also know that I can contact Amex directly by phone if I'm concerned or I want to validate something. So I just avoid responding to any text messages at all from financial institutions. And I would suggest that everyone do the same.
But I'm not convinced that my 90-year-old grandmother can avoid responding to all text messages. And if she hasn't interacted with a scammer already, I'm concerned that one day the wrong person will get to her.
Now, short of regularly reminding her to refrain from responding to these common scams and someone monitoring her text messages, the only other options to protect her and others out there who might be at risk are one, changing the settings on the phone to only allow text messages from numbers associated with existing contacts and block everything else.
If you're interested in doing this on your phone or someone else's phone, I'll link to an article explaining how to do this on an iPhone and an Android. So you would change the settings and only allow text messages to come through from phone numbers that are associated with existing contacts and then block everything else.
And then number two, similar to the last scam we reviewed, you can also pay for a text blocking app to further help prevent these spam texts. Calls Blacklist is a popular one for Android phones that helps block both calls and texts. And Haya and Truecaller are two popular ones for iPhones that have similar functionality. So I'll link to all of that in the show notes for everybody.
In addition to all of the tactics I shared today to help protect yourself and loved ones against these increasingly sophisticated scams, the one thing that everyone listening should do immediately after finishing today's episode is to freeze your credit. If you were ever to fall victim to a scam or someone got their hands on your personal information, they wouldn't be able to open accounts in your name or take out any loans.
Similarly, you wouldn't be able to either if your credit's frozen. It would require you to unfreeze your credit if you ever need to obtain a loan or open a new credit account in your name. The analogy that I've used in the past here on the show is that credit monitoring services like Credit Karma or LifeLock, these are akin to installing an alarm system in your home. They alert you after somebody has already broken in.
Freezing your credit, on the other hand, is like installing a deadbolt on your front door, preventing someone from getting in in the first place.
everyone should have their credit frozen. It's a slight inconvenience to unfreeze it when it's needed, but the inconvenience is well worth it. And it's becoming so much easier now that everything is app-based. I can freeze and unfreeze my credit with all three major credit bureaus with a tap of a few buttons on my smartphone. So if you have not tackled this and you wanna learn more, I'll link to a couple of great resources in today's show notes, which can again be found by going to youstaywealthy.com forward slash 198.
I truly hope you found today's episode helpful, maybe motivating. I know this topic is not as entertaining as Roth conversions or social security optimization strategies or smart investing tips, but it's equally, if not more important, it's hard to keep up with the latest trends and the sophisticated techniques being used. So please do reach out and let me know if you've experienced something or read about something that you think our listeners should know about.
In addition, please reach out and let me know if you have any follow-up questions or suggestions for a future episode. As always, you can send me an email at podcast at youstaywealthy.com. That's podcast at youstaywealthy.com. Thank you as always for listening, and I'll see you back here next week.
