As long as currency has existed there have also been enterprising criminals out there trying to take hard earned money from innocent citizens in clever ways. Financial scams are everywhere. You know the heavy hitters: the nigerian prince, the shell game, three card monty. Lately, there have been a lot of instances of IRS scams popping up alongside the new scam of “Obama’s Student Loan Forgiveness Program” to grift people out of their cash.

However, some of the most startling scams are the ones that no one expects. Anyone that lived through the financial crisis should remember Bernie Madoff who defrauded millions of Americans with a Ponzi scheme to the tune of $65 Billion while serving as the chairman of the Nasdaq, running what people thought was a legitimate business for nearly 40 years. Some scams can be relatively easy to spot, while others take a keen eye. You can make sure you don’t put your money into a scam by arming yourself with knowledge. Here are some things to look for.

Types Of Scams

While it would take pages and pages to make a definitive list of all the scams that could beleaguire you, there are some common ones that you can spot pretty easily.

    • Ponzi Schemes – A Ponzi scheme is usually touted as a high-reward, low-risk investment that can promise massive returns because whoever is running it has some kind of tool, knowledge, or practice that other industry professionals aren’t using. As new investors put money in, their money is used to pay off old investors, thus giving the appearance of a massive return. The cycle continues until there are no new investors, at which time the scheme collapses. This is why it’s important to make sure that financial advisors and money managers have your best interests in mind.
    • Pyramid Schemes – Pyramid schemes rely on recruitment in order to make a return. The person at the top is paid a percentage of your earnings as a fee for recruiting you and for each new recruit on the downline. In order for you to make any return on your investment, you need to get recruits on your downline. The whole thing functions as a pyramid, where the small number or single person on top make a huge portion of money while the people on the bottom and in the middle support the pyramid.One should be aware that, while they are structured similarly, Multi-level Marketing companies are not pyramid schemes. The person higher on the downline makes a portion of your sales as a commission and you make a portion on commission from the people below you. MLM companies are not exactly scams because they do sell a tangible product and they are regulated by the Federal Trade Commission.
    • Pre-IPO Investments – While there are stories of people getting the option to purchase stocks in many of the FANG stocks before they had their initial public offering, these are largely a fabrication. Shady people will try to sell you on the “next big thing” and offer you a seat on the ground floor. The thing that makes these so scary is that, while people selling securities through private offerings are required to register their offering, the regulation isn’t extensive and scammers bend or ignore laws to separate you from your money. In other words, the investment rarely pays out and you’ll be left holding the bag.

  • Government Imposter Fraud – These are the phone calls, texts, or emails from from government agencies like the IRS, Student Loan Forgiveness, or any other government agency in which scammers attempt to get your money using the intimidating power of the government. These are often forceful in tone, promising that you will be reported to the police or deported for a lack of payment. Sometimes, especially with student loans, they try to assure you that the government is there to help you if you are in a dire financial situation. Always be suspicious of any official communication that isn’t sent through the mail.
  • Phishing Emails – These emails appear to come from reputable banks and other companies that you might shop at or receive services from. They are usually highly recognizable brands. They will often contain a form that you must fill out in order to continue service or something similar. The point of a phishing email is to obtain private information, social and credit card numbers, and other information used to steal your identity. Always be suspicious of an email from someone you don’t recognize and never click any links contained in a phishing email.
  • Charity Scams – These are especially prevalent after disasters or near the holidays when people are feeling charitable. These people take advantage of people’s kindness. They may talk to you in person, or else call or email and ask you to donate. Pressure to donate immediately is usually a good warning sign. You can always verify the existence of the charity through the National Association Of State Charity Officials and then choose to donate later.

This is by no means a definitive list of scams and fraudulent practices that you need to watch out for. While these are some of the biggest scams, anyone with a keen eye and the ability to make rational decisions can spot scammers if they know what to look for.

Signs Of A Financial Scam

If you believe that you have encountered a financial scam that’s trying to separate you from your money, watch for these warning signs:

  • Does the claim sound too good to be true? Then it likely is a scam. Impossible returns and “get rich quick” practices are almost always a sign of a scam.
  • Did the contact come out of the blue or from someone you don’t know? How did they obtain your contact information? If it doesn’t make sense for them to be contacting you, they may be a con.
  • Is it difficult for you to obtain your money? Financial scams, especially Ponzi schemes, will tell you that your money is frozen, when it’s actually in someone else’s pocket.
  • Are you required to give some kind of money initially to receive some kind of compensation or reward, like a lotto prize or to pay for a “background check” while applying for a job? This is a classic scam that people fall for all the time.
  • Are you being asked for your personal information? Be cautious with your info that could be used to steal your identity.
  • Be cautious of excessive or impossible guarantees. Refer back to the “too good to be true” treatment. A great guarantee is awesome. An impossible one is a scam.
  • Overall, if you smell smoke, there may be fire. You have to protect your finances from unscrupulous people that would take it from you.

Breaking Down A Myth: Is Infinite Banking A Scam?

If you read any of Factum Financial’s other blogs, you know that we are proponents of Nelson R. Nash’s Infinite Banking Concept, a method to grow and protect wealth using specifically designed whole life insurance policies to maximize your cash flow. As with any “radical” financial concept that encourages people to approach savings and wealth differently, there are a few naysayers who have egregiously labeled Infinite Banking as a scam. Nothing could be further from the truth, but based on the above parameters for a scam, let’s break that claim down and look at why Infinite Banking using whole life insurance is not a scam.

  • First, think about the above scams. How many of them involve a fictitious product or no product at all but the promise of a massive return on investment? When you practice Infinite Banking, you have a real and tangible insurance policy from a mutual life insurance company that pays a yearly dividend and has a usable cash value built in. You aren’t putting your money into a fairytale.When we talk about this process, we don’t like to call it “radical” because the manner in which you grow and protect wealth while using life insurance to fund your needs has been around for hundreds of years in the United States. Whole Life Insurance has existed for 200 years and people have used whole life insurance policies to build their cash flow throughout the history of this country. Would you believe that the biggest purchasers of whole life insurance are banks? Why would a bank trust a scam?
  • Your growth isn’t some impossible scenario. While growth is steady at a satisfactory percentage, you’re banking on consistency with the Infinite Banking Concept. Where others want to be the hare, we are satisfied to be the consistent and safe tortoise. Who wins the race in the end? With Infinite Banking, the whole picture is what we want you to look at. You can purchase a house, pay down debt, and save for retirement with whole life insurance. Your assets that you worked so hard for can also be protected and passed on along with the financial wisdom that we impart to you. Your journey starts here, but this is a long term financial solution. If it were a scam, your future wouldn’t be the focus, just the present.
  • While you can and will grow and maximize your wealth with the Infinite Banking Concept, we actively encourage discipline and sound financial decisions. This isn’t a “get rich quick” scheme. It’s a shift in thinking about your finances for the future to come.

Now, think about the people that have labeled Infinite Banking unfairly. Are they sponsored by some other financial company or are they trying to sell you their method for success? There seems to be a correlation there.

A Wealth Solution You Can Trust

Banks love to use life insurance to protect their assets and take advantage of safe growth away from the stock market. If Bank Owned Life Insurance (BOLI) is increasing annually and many of the largest banks protect their assets with whole life insurance, does it seem possible that our trusted financial institutions would fall for a scam? A lot of people trust Walmart with their weekly shopping but they don’t know that Walmart grows and protects wealth with whole life insurance.

Many of the wealthiest and most influential people from Doris Christopher, the creator of Pampered Chef, to the late Senator John McCain have used life insurance to protect their wealth and to fund businesses and political campaigns. Particularly in the case of the former Senator, would he trust campaign funding to a scam? Infinite Banking works and the only people who don’t want you to get in on it are the people that benefit from your reliance on them. Now you can do what they do.

At Factum Financial, our wealth strategists encourage you to just think differently. With a free 30 minute wealth strategy session, we can help you shift your thinking and show you how to become your own banker, giving you the ability to access true financial freedom. Whether you are just starting your fiscal journey or you’re well on your way, you can find a wealth solution at Factum Financial. Contact us today for more information.

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