Faith Alone Should Not Decide Your Financial Security
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Social Consensus/Source Credibility
It's human nature to want to trust those around you—family, friends and people at your clubs and faith community. And when those people make decisions and recommendations—like investing in the next "hot" deal—you're often more inclined to take their recommendations.
This type of behavior is called "social consensus," and is used by cons to commit affinity fraud. A fraudster will find a tight-knit group of like-minded people who share similar beliefs or interests—like a social group or a church. Then he creates a domino effect, luring investors one by one through their own recommendations within the group. Fraudsters know that potential investors are more likely to follow suit when they see friends and family onboard.
About 60 percent of Utah residents are Mormon, belonging to the Church of Jesus Christ of Latter-Day Saints (LDS). They are a close-knit and trust-worthy community. For this reason, affinity scams targeting this faith group can spread quickly.
Take Jim and Diane Smart, two very active members of their LDS church in Utah, who lost more than $200,000 to a fraudster masquerading as a church-going financial expert.
The con promised financial rewards to be used for families and couples to attend mission trips and help better themselves as church members. Like many of the con's victims, this appealed to the Smart's deep faith.
But experts like Michael Hines, Chief of Enforcement of the Utah Division of Securities, suggest you exercise caution, since fraudsters readily abuse this trust and loyalty. "Independently verify the offering," said Hines. "Don't allow the trust or the church membership to be a weighted decision maker for you."
The Smarts allowed only faith to be their guide and lost hundreds of thousands of dollars to investment fraud. Use these tools and resources to make informed decisions about saving and investing.