How Financial Fraud Impacts Investors

We speak with Andrew Crowell, Financial Advisor and Vice Chairman of Wealth Management at D.A. Davidson, about the top threats to financial wellness and why financial fraud is on the rise. Crowell also shares the ways investors can protect themselves from financial fraud attacks.

What are some of the top threats to financial wellness today?

Investors are facing a variety of threats to their financial well-being, including rising inflation and insufficient emergency funds, but one of the most imminent threats is financial fraud.

It’s much more common than we’d like. According to a recent D.A. Davidson survey, one in five Americans (22%) know they have been a victim of financial fraud, and nearly one quarter of Americans (24%) reported having a loved one who has been a victim of it.

Is financial fraud on the rise? Why is this? 

At D.A. Davidson, our clients experience financial fraud attempts every day. Advancements in technology have opened up many more avenues for hackers to gain access to confidential personal information. The most common type of fraud attempt we see is email phishing, prompting individuals to provide passwords for their investment accounts to unprotected sources.

We are even seeing a rise in cell phone phishing via text messages. Given the rapid-fire nature of text messaging, there’s an even greater risk for people to respond quickly without properly vetting the request.

What are some red flags consumers should look out for?

According to our survey, only one third (33%) of Americans feel very confident in their ability to detect personal financial fraud attempts. A few red flags individuals should watch out for include unsolicited, urgent requests – even if it’s from someone that it looks like you might know; asks to verify sensitive information over the phone; and requests for unorthodox methods of payment like gift cards or cryptocurrency.

These are just a few potential indicators of fraud. Working with a financial advisor can help you learn what signs to look out for, but anything that compels you to take immediate action is a red flag. Financial advisors can also help you determine if specific requests are legitimate or fraudulent. When you receive a phone call from an unknown source, be sure to ask for the details in writing before sharing any sensitive information.

Remember that if something sounds too good to be true, it probably is. Trust your gut and consult a financial advisor for anything that seems unusual.

What are some guardrails individuals can put in place to protect themselves? 

Having a trusted contact for your investment accounts is another key to preventing financial fraud. A trusted contact is a person you authorize your financial advisor to contact if they suspect that you have been the victim of fraud or are experiencing deteriorating cognitive health impacting your ability to make financial decisions. A financial advisor can help you through the process of authorizing a trusted contact and making sure your finances are as secure as possible.

Our cell phones today contain a lot of personal, financial information. Be sure to have a passcode on your phone to add another layer of protection to your data. Avoid creating accounts and saving your credit card information online. Checking out as a guest can help prevent your credit card information from being compromised. Review your credit report regularly to check for any unknown lines of credit listed in your name.

Using a Virtual Private Network, or VPN, can also protect your data when you are connected to public wifi networks. Some individuals may also wish to sign up for identify theft protection.

How does financial fraud impact investors? 

Financial fraud can be devastating to investors both financially and emotionally. That’s why it’s critical to be vigilant and protective of our personal information and that of our loved ones.

This interview originally appeared in our TradeTalks newsletter. Sign up here to access exclusive market analysis by a new industry expert each week. We also spotlight must-see TradeTalks videos from the past week.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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