December 8, 2012 — Researchers at DePaul University and the Rush University Medical Center think they have found the underlying reason for an alarming rise in fraud committed against our rapidly aging baby boom generation. The explanation often arises from “that combination of not knowing but thinking you know”, according to Keith Gamble, an assistant finance professor in DePaul’s Driehaus College of Business. In other words, overestimating what you think you know, to your detriment. There is a helpful summary of the “Overconfidence Linked to Senior Fraud” study over at the Financial Security Project at Boston College.
The researchers were trying to determine if declining cognitive abilities were behind the susceptibility to fraud, but were surprised to find that faultier decision making is more of the problem. Gamble said in the study that “They (seniors) are actually more confident in their financial decision-making capabilities. The problem is they don’t have the decision-making ability they once had.” In the study people were asked various questions about financial literacy, and then asked how confident they were about their answers. The folks who were most often victimized tended to be the ones who gave wrong answers and were the most confident they were correct.
Complaints of financial fraud compiled by the Federal Trade Commission surged to 1.5 million last year, an increase of more than 60 percent from a few years ago.
Some of the top frauds perpetrated against the elderly are: free financial seminars, unsolicited calls about financial products, too good to be true offers, power of attorney or advisor abuse, overcharged medical expenses, reverse mortgage offers.
For further reference:
Download the entire study from DePaul University.
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