The Financial Industry Regulatory Authority (FINRA) today published the findings of its research into how emotions can increase susceptibility to fraud in older adults.
Recognizing the mechanisms of scams helps investors to protect themselves.
It is a well known fact that financial fraudsters often attempt to evoke strong emotions in their victims in order to convince them to hand over money, and the evidence is that seniors may be particularly vulnerable to the effects of heightened emotions on decision making.
With funding and research participation from the AARP Fraud Watch Network and the FINRA Investor Education Foundation, psychologists at Stanford University found that inducing emotions in older adults increased their intention to buy or subscribe to falsely advertised products or services.
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The research team examined whether inducing excitement and anger increases susceptibility to fraud in older adults aged 65-85 and younger adults aged 30-40. The participants were asked to view a series of advertisements that had been designated by the Federal Trade Commission as misleading and were designed to induce them to exhibit excitement or anger. For each one, participants were asked to rate the believability of the content and the likelihood that they would purchase it if cost were not a consideration.
In older adults, both excitement and anger increased intention to purchase the items compared to no emotional arousal. In younger adults, however, there were no significant differences in intention to purchase, suggesting that heightened emotion did not have an effect on younger adults’ susceptibility.
Furthermore, whereas in younger adults greater advertisement believability was associated with greater intention to purchase, believability and purchase intention were not significantly related in older adults.
The findings suggest that older adults’ intention to purchase was not based on perceived credibility, but rather on the emotional states they were experiencing.
Dr. Shadel, Research Lead for AARP’s Fraud Watch Network, commented: “Cons are skilled at getting their victims into a heightened emotional state where you suspend rational thinking and willingly hand over your hard earned money to a crook.”
Gerri Walsh, President of the FINRA Investor Education Foundation, concluded: “This research is a major advance in our understanding of how fraud works. Recognizing the mechanisms of scams helps investors to protect themselves. Money is emotional, and managing your emotions around financial decisions is critical to avoiding fraud.”