Why Some are More Vulnerable to Financial Scams

Can attitudes, beliefs, even politics impact whether a person is more likely to fall for a financial scam? The short answer is “yes.” After a two-year study, researchers have learned which key personality traits cause one person to be more likely to be scammed than another. Knowing yourself and the traits or “mental frames” defined in the research may help prevent you from falling for a well-designed scam.

The FINRA Investor Education Foundation (FINRA Foundation), Better Business Bureau (BBB) Institute for Marketplace Trust, and the University of Minnesota are responsible for the study titled, Exposed to
Scams: Can Challenging Consumers’ Beliefs Protect Them from Fraud?

The Study

Participants were chosen from Better Business Bureau report complaints filed on BBB Scam TrackerSM. Researchers gathered study data throughout 2017 and 2018 and conducted interviews.

Investigators found that attitudes and beliefs shaping the way study participants looked at the world, known as “mental frames,” may have influenced the way they reacted to scams. Specifically, researchers propose that mental frames governing four attributes, Compliance, Opportunity, Intelligence, and Order may have influenced how the scammed interviewees interpreted what scammers told them.

Compliance – Belief that authority and institutions yield power over the individual.

Expectations that authorities can enact sanctions and limit the freedoms of individuals had the more likely scammed to believe that authority should not be challenged.

Opportunity – Wealth is built on random opportunities.

The thought that the world is organized in a way that rewards good people. Asking too many questions can make a person seem ignorant.

Intelligence – Not knowing the answers causes shame and reduces an individual’s status.

Perceived lack of intelligence can affect an individual’s sense of power and impact.

Order – The natural order of things is benevolent and just.

Individuals who do good will be rewarded and those who do bad will be punished.

Mental frames, according to the study, may determine how and why some people lose money to fraud. The concept is based on the theory that all human learning, whether formal or informal, is socially based. And human response to life events is shaped by perception of reality, which reflects what we have learned from our schooling, our experiences, and our interactions with others. So, whether subconsciously or consciously, mental frames guide thinking and reactions to money, people, power, authority, and other aspects of life.

Mental Frames and Financial Fraud

The study was designed to identify the mental frames that may cause people to lose money to financial fraudsters. Researchers wondered if identifiable mental frames might lead people to overlook red flags and inconsistencies in a scammer’s appeal. Similarly, they wondered if mental frames could protect individuals by motivating them to question the situation or reject the scammer’s pitch. Understanding why someone avoids scams offers hope to protect the broader population.

Part of the mental framework that is most vulnerable is the desire to believe that good things actually do happen to good people. And, that good individuals are protected from undeserved harm. People who believe in a just world may ignore the warning signs of something that should seem too good to be true. When this optimism is paired with a mental frame that suggests wealth is a zero-sum game, the individual may have trouble seeing the warning signs of a scam.

These four mental frames play out in different ways in different people. One frame may take precedence over the others, or the effects of two or three mental frames may come together to strongly influence the individual’s response to the scam.

“This research gives us new ways to understand who is at risk for losing money to financial scams and opens novel possibilities for protecting people against different forms of fraud,” said FINRA Foundation President Gerri Walsh. “We hope these insights into the role that beliefs and attitudes play in fraud victimization will stimulate additional research and the development of effective strategies to reduce consumer losses.”

Take-Away

The mental frames defined above are noble characteristics to have. However, when dealing with someone that calls by phone, perhaps pretending they are with the IRS, it can for some be difficult for many to push back and be consistent with who they are. Knowledge of this study’s results, coupled with a good look at one’s own mindset, could cause one to pause, think, and avoid making an expensive mistake.

Paul Hoffman

Managing Editor, Channelchek

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