Finances affect people of all ages, but we are quickly becoming a world in which older generations have significant wealth. For example, it is estimated that people older than the age of 50 are the wealthiest segment of society within the United States. A study from 2016 shows that this demographic controls more than 80% of the nation’s total wealth. With such a high amount of wealth concentrated in older populations, the issue of financial risk and age becomes very important.
Stratford Management, based in Japan, helps clients make sound decisions about their wealth and assets. Our risk and investment management professionals understand the fluctuations of the market, inherent risk, and possible signs of suspicious transactions. For more information on our services, or for financial advice, contact our Japan office in Tokyo.
Digging Into the Data
Studies have increasingly shown that the aging process makes some significant changes to the brain. In fact, older brains exhibit less neuroplasticity than younger ones, meaning that just as our muscles tend to weaken with age, so too do our mental capabilities. That is not to say that we become less intelligent. Rather, it means that our brains process things in different ways. One side effect of that seems to be that we become more susceptible to investment and financial fraud.
This seems to be true even among people who do not have debilitating neurological disorders such as dementia or Alzheimer’s Disease. Additionally, studies show a correlation between financial scheme susceptibility and lower literacy levels, lower income, poor mental health, and lack of a social network. That is, people who are less educated, have lower levels of wealth, suffer from existing mental health conditions, and are isolated are more likely to fall prey to the perpetrators of cons.
Phone Tricks and Internet Fraud
In some respects, the habits of older adults can contribute to this tendency as well. For example, elderly generations are less familiar with online commerce and are less able to navigate potentially risky internet scams. It’s also true that previous decades saw more over-the-phone sales than is currently in vogue, suggesting that older people engage in more of this type of activity.
Phone and internet cons are particularly risky because they involve a lack of person-to-person contact. That means there is no chance for the potential target to see the con artist, and they can thus hide behind a sense of total anonymity.
Social Bonding Is Necessary
One of the most intensely predictive measures of whether an older person will be vulnerable to financial exploitation is whether or not they have a strong social network. Isolation has been associated, in a study published in the Journals of Gerontology, with a shrinking of certain areas of the brain. These areas of the brain help process social interaction, which is how we assess red flags and warning signs of potential scams. The more isolated an older individual becomes, the more likely they are to lose the ability to properly judge scams for what they are.
Also, having a social network is often a great barrier against exploitation because our friends and family may be able to spot signs of suspicious activity that go unnoticed by us. For this to work, you need to have a group of people you can trust enough to discuss financial opportunities with, and whose feedback you find valuable.
Protecting Yourself From Fraudsters
There are several tips you should keep in mind as you age, and not just the one to get a trustworthy social circle. Below are just a few things to remember that can help insulate you from superfluous financial risk.
- Never transfer money through a wire; instead, use banks or credit card payments, since these often have fraud prevention measures built in.
- Take time to consider opportunities even if the offer seems to have a tight deadline. Con artists often use pressure techniques to get you rattled.
- If you ever feel uncomfortable, put the decision on hold. It is better to forego an opportunity now than to jump into one and have a scammer take your money.
If anyone needs help handling their investments and wealth, Stratford Management in Japan has the resources. Contact the Tokyo office to get insight on how to avoid risk and grow your assets.