Twenty-three-time Olympic gold medalist Michael Phelps just raced a great white shark to celebrate Shark Week 2017. He lost. And he didn't race against a live shark, but a computer-generated image of one. Phelps swam alone off the waters of South Africa. Many who tuned in to watch the race felt cheated. Phelps defended the format. The great white had no comment.

But when it comes to financial fraudsters—the sharks who prey on Canadian investors and their money—the situations are as real as it gets. And the consequences can be devastating.

Fraud is a crime that threatens every Canadian, regardless of education, age or income. It is estimated that Canadians lost over $290 million to fraudsters from January 2014 to December 2016. Fraudsters are increasingly targeting seniors, and the B.C. Securities Commission found that 1 in 8 British Columbians over 50 is vulnerable to investment fraud.

So how do fraudsters target investors and how can they protect themselves?

How Do Fraudsters Approach Investors?

  • Fraud is built on trust. Fraudsters like to target people by building a relationship based on trust, and then use it to influence their financial decision making. Some fraudsters build this trust through groups—seniors' groups, community groups, running clubs or in ethnic communities. Establishing trust is one of the most powerful tools fraudsters have.
  • Investment seminars. Fraudsters will invite people to professional-looking investment seminars that seem to be authoritative. The presentations and materials may appear detailed and credible, but they're not. Creating an air of legitimacy is a key part of a scam.
  • Unsolicited emails or phone calls. Some of these involve family members who are supposedly in distress. An unexpected call may come that a loved one needs money. Or a senior might be told that an investment can make a big return for a grandchild's post-secondary education. These kind of frauds are meant to tug at peoples' heart strings and must be treated with suspicion.

How Do Investors Spot the Warning Signs and Protect Themselves?

  • High pressure sales tactics. Fraudsters will offer opportunities with "inside" or "top secret" information that can't be shared. Or they will say that if people don't get in on an investment quickly, a golden opportunity will be missed. This creates time pressure and no ability to get a second opinion. If investors feel like they're being pressured into something, they need to walk away.
  • High returns with absolutely no risk. There is no such thing in legitimate investing. All lawful and regulated investments carry some level of risk. Investors always need to keep in mind that if something seems too good to be true, it probably is.
  • Seek a professional opinion. Before people make any type of investment, they should talk to a financial advisor they have vetted. An advisor's professional registration and disciplinary history can be checked online. If the advisor is on a warning list with a Canadian securities regulator, it will be made public. Searching the Internet and news online can reveal a fraudster. These are essential steps investors need to take to protect their money.

Like Sharks Drawn to Blood

If people have money to invest, they are potentially vulnerable to fraud. Not only wealthy investors are scammed. There is no "typical" victim of fraud—fraudsters are aggressive and are drawn to money like sharks are drawn to blood. But investors can protect themselves.