The Millennial Guide to Financial Security — Part I
An Interview with a Scammer — The Secrets, Methods and Techniques Scammers use to Target Millennials
A Little About your Author: Fraud Stamp is a small team of experts in personal finance that offers a range of free resources including online courses, books and reports to educate investors in the field of finance and investing. You can visit our website at www.fraudstamp.com or follow us on Twitter and Instagram @FraudStamp. Enroll on our latest free short online course, ‘Giving the Scammer a Kick in the Groin’.
Let’s be frank, there is no shortage of sharks prowling the social networks looking for their next victim. This isn’t an issue solely for millennials. Scammers don’t discriminate. The only difference is that the scammer has three times more success with millennials. This is, in a nutshell, why you are such an attractive target. So if you were the scammer what would you do?
What we are going to examine here is how the scammer is targeting our millennial brothers, sisters, sons and daughters i.e. you and how you can avoid these scams whilst continuing to live a normal life. Getting the balance between paranoia and lackadaisical is important because we must all recognize that we are all potential targets of fraud. Millennials more so.
What is a Millennial?
Let’s clarify the definition of millennial as everyone we talk to has a different idea of what age group a millennial falls into. A millennial, according to the general held view, is anyone born between 1982 and 2000. More than a quarter of the US population fit this description.
Why are Millennials such an Easy Targets?
Listen, if you are a millennial reading this, don’t get offended by what we write next. We must always attempt to understand what is the root cause of a problem before we can solve it. And that is what we are doing here, identifying why you are comparatively easier targets than your older brethren. To assist us in this mission let us take a look at the five traits that millennials possess:
- Curious — you are more curious than generations before you.
- Individuality — you are more concerned with standing out, distinguishing yourselves from the crowd.
- Social good — you are more concerned with the environment than previous generations.
- Financial stability — you are also more concerned with attaining financial stability than older generations especially as many of you were adversely impacted by the Great Recession where 15 percent of you lost your jobs.
- Technological — this trait is patently obvious, you are far more comfortable using technology than your older contemporaries, from apps to social media to cryptocurrency.
There is another trait which we haven’t included, greed! The reason why we have not included greed is because it is a human trait we all possess. The level of greed we are each blessed with will affect our decision making and determine whether we are an easier target than our neighbor. It is time to retell a short story to demonstrate this point.
A few years ago a friend of mine contacted me to ask for my advice. He told me that he had just been contacted by someone via email with an exciting opportunity. The person had explained to my friend that he had recently inherited (I know what you are thinking…. ‘I know where this is going,’ but please bear with me) $25m but didn’t have a bank account. Could the fortunate heir to this fortune deposit his legacy into my friend’s bank account? When my friend called me to ask for my advice he was ecstatic. The desperate man had offered him a 20 percent cut of the inheritance for my friend’s inconvenience. He was going to be a millionaire he told me. He also went on to warn me that I had better not contact the soon to be recipient of this vast fortune and try to persuade him to use my services instead of his. I explained to him calmly and reluctantly that this was a scam. He refused to believe me.
‘How could you know this?’ he asked me ‘You haven’t even seen the email.’
I asked him one simple question,
‘Was the email from Nigeria?’
‘How could you possibly know that?’ he replied. And within 60 seconds I had unfortunately burst his gold plated bubble.
What has this story got to do with millennials you are probably thinking? It is a demonstration that we are all susceptible to scams because we are all inherently greedy. The reason why some of us fall for scams and others don’t all comes down to one thing. Information. I happened to possess more information than my friend on the subject of scams. He didn’t know that the next email he was about to receive from his Nigerian heir turned scam artist would be a request for a small fee to release the money from the lawyers account and these requests would keep coming. So this article is really about arming you with the required knowledge to detect BS when we hear it or read it. It is equally as applicable to you the millennial as it is to all generations.
Financial Traits of the Millennial
It is important that as well as understanding the personality traits of the millennial we also understand your financial attributes. Understanding what drives our own decision making process is key to identifying our vulnerabilities. The bottom line is we must understand ourselves in order to gain valuable insights.
As we identified above, millennials have a tendency to seek financial stability. You worry more about meeting key financial goals such as buying a house, paying off student loans or saving for retirement. How do my habits manifest themselves you may well ask?
1.You tend to start saving early. It is accepted for instance that millennials are ‘one of the best generations at saving and are becoming increasingly savvy at putting those savings to work.’
2. You invest in your pensions. 45 percent of you have a retirement account. And 33 percent are actively contributing to it. Why the high savings rate? Because nearly half of you ‘expect’ to retire early as opposed to only 17 percent for baby boomers.
3. You pay closer attention to investment costs — by investing in low cost passive index funds or Exchange Traded Funds. Over 40 percent of you own an Exchange Traded Fund (ETF), a big jump from a few years ago. You are shunning the traditional route of investing in funds managed by ‘star fund managers’. Finally a generation that has seen the light!
4. Impact investors — social and environmental issues are important to you. Unlike the older generation who have trouble separating the cardboard from the wine bottles millennials are leading the way. Almost two thirds of you are ‘highly interested’ in sustainable investing.
A recent survey sums up the above points perfectly. It showed that 7 in 10 millennials are investing financially in something. And what is interesting is that 85 percent of you do not feel too young to invest, whilst previous generations were fearful at a similar age you are fearless! And that explains why so many millennials are investing in the stock market and using apps like Robinhood, whilst the older generation are showing more caution.
A few other facts which are interesting for our purposes include:
- You are the most optimistic of any age group about investment returns
- You anticipate a 12 percent average annual return over the next 5 years (Schroders survey)
- More than 70 percent of you have at least one source of long term debt and 30 percent have more than one. Thus you have a major incentive to reduce your debt
- Nearly half of you own your own home
- 44 percent of you have a degree
There is one fact which is worrying however, particularly in light of the cruel intentions of the prowling scammer…
- Only 7 percent of you show a high level of financial literacy
Millennials and Fraud
We have already made it clear that millennials are the low hanging fruit of the scammer. Let’s take a look at the cold reality of this unpleasant situation.
- 20 somethings are nearly three times as likely to fall victim to a scam as seniors (FTC).
- Even though millennials are more likely to report losing money their median loss of $400 is much lower than what other age groups report.
- The UK’s regulator the FCA says that those under 25 are six times more likely to trust an online investment made by social media than people aged above 55. They also reported that online overtakes phones as the most common contact method for investment frauds.
Meet Sal the Scammer
It is time to meet Sal the scammer. Sal lives in Long Island, the home of the scammer. He owns a palatial apartment financed by his years of scamming. Let’s find out from Sal what his favorite scams are, the ones that make him the most money and the tricks he uses to part his victims from their hard earned cash.
Fraud Stamp: Sal, who are your favorite marks? Do you look at your victims as marks by the way?
Sal: Marks is an appropriate word. I prefer that word to victim. I don’t look at them as victims. They brought this upon themselves. Through greed and stupidity. But returning to your question, millennials are my favorite targets, it is like taking money from a baby.
Fraud Stamp: I think that is a bit strong about greed and stupidity. But I am not here to get into the morals of it with you, we can leave that to another discussion. Why are millennials such easy targets?
Sal: A few reasons. They are not afraid to invest and it is also easy to get their personal information from them online.
Fraud Stamp: Ok, interesting. So what types of frauds are the most lucrative?
Sal: There are a few. The most lucrative are imposter scams and investment fraud.
Fraud Stamp: Can you tell me how each of these work?
Sal: Sure. Let’s take the imposter scam first. I use this little trick for a few types of scams. The best one is when I send an email to my target or mark, as you called them, and say I am from the bank and that their security has been compromised. I then get them to wire their money from their bank account into mine. Simple. I also use the same technique when I make out I am from the IRS and email my agreeable millennial threatening them with a big fine if they don’t pay their back taxes. They usually wire the money to me pretty quick.
Fraud Stamp: That all sounds pretty unpleasant stuff! Please tell me a bit about your investment scams, how do these work exactly?
Sal: I have a few of these up my sleeve. But the best one is my cryptocurrency scams. Not many people know how cryptocurrency works but they have seen people making extraordinary money. So all I have to do is build a cheap website offering massive weekly returns for a small investment. Some of the little tricks I use which entice investors are testimonials from people who obviously don’t exist. Sometimes I use a company name that sounds like a more established company. Sometimes I even say the company is regulated when it clearly isn’t [Fraud Stamp note: 1 in 10 people don’t bother checking if a company is regulated]. I run these scams for a while until the complaints start coming in bitching about not having received their promised returns. I close the website and start again with a new one with a different name.
Fraud Stamp: Okay well that is even more unpleasant. So before I beat you to within an inch of your life maybe you can do something good for a change. If you were advising one of your potential victims what would you tell them so that they can avoid falling for your dirty little tricks?
Sal: That is an interesting question which is bound to lose me a lot of money but for some much needed karma here goes…
There are two red flags that the soon to be victim should always be on his or her guard for.
Firstly, the scammer always says send money right away. Usually with some threat attached to the demand. It is never a request, it is always a demand. So my advice in this regard is that anyone who says by email or phone to send money ASAP you tell them that you will get back to them and you investigate further. Chances are you will never hear from them again.
Secondly, the scammer asks you to provide personal information that the person is already supposed to have. Like your account number, social security number, date of birth etc. My advice here is never confirm this information over phone or email. As with the first example, say you will get back to them. This will usually reveal the scam if you say this to someone on a call. They will become immediately flustered and aggressive. My advice is be strong and hold your ground.
Fraud Stamp: Thank you Sal, well at least we finished on a positive note.
Confirming Sal’s Story
A recent report issued by the FTC confirmed Sal’s story. They listed the top three frauds targeted at millennials as:
- Imposter scams (bank scams) — which is exactly the scam Sal was talking about.
- Debt collection scams — this is when someone calls up demanding you repay a bogus debt with various threats.
- Identity theft — this is when someone uses another’s identifying information, like their name, identifying number, or credit card number without their permission.
Job scams — this is simply scammers offering to find you a job for an upfront fee. They have no intention of lifting a finger in your search for a job.
Travel vacation and timeshare schemes — this is when a scammer tries to sell you a vacation related scheme which either doesn’t exist, or if it does will involve additional undisclosed costs. Something else the scammer doesn’t tell you, it will be impossible to resell your timeshare.
Student loan scams — there are many variations of these from advance fee scams, where the scammer takes a fee upfront for the promise of finding you a better loan rate or consolidating your numerous loans into one, to bogus law firms promising you that they can settle your loan for substantially less than you owe, of course to do this you must send a percentage of your loan to them first.
Government grants — this one starts with the pitch ‘You are eligible for a government grant.’ What is the catch? There is no grant and of course the scammer wants you to provide your credit card information or send him a wire to cover any fees for the grant.
Federal student tax — Sal discussed this scam above.
Smishing offers — Smishing is any kind of phishing that involves a text message. These text messages are intended to obtain your personal information so that they can apply for credit cards in your name.
Tech support — this is usually when someone contacts you pretending to be from Microsoft and using various techniques to gain access to your computer with the intention of stealing your credit card information or getting you to pay them for their help.
Remember always that the scammer is an inventive fellow (some are women, but mainly men) and the above list is not exhaustive. There will be new scams that will emerge based on the circumstances of the time. There were the black lives matter scams, corona virus scams, you name it Sal has thought of it. The same basic rules apply. The scams all follow the same rule book and can all be avoided by following a few simple steps.
No Financial Advice
This article does not constitute financial advice in any way. This article should be treated as supplementary information to add to your existing knowledge base.