Investment scam operators love older investors, says former Kansas Securities Commissioner Marc Wilson. The reasons are many, including:

We have money, a life-savings worth, even if it might not be as much as we hoped. We're polite, which means we may be more reluctant to hang up on a telephone sales pitch or to ask questions about details we don't understand. We may be more nervous about finances, especially if we're worrying (which can cloud our judgment) about recovering from a recession or future hospital or nursing home costs. We're embarrassed if we get conned, and therefore are reluctant to tell anyone.

All these factors and more are true of younger investors, too. But experience shows they can be bigger issues for those of us in our 60s, 70s, or older who are exploring the financial frontier of life after our final paychecks. Plus, no one is bullet-proof. Bernie Madoff ripped off a lot of sophisticated seniors along with other victims before that Ponzi scheme crashed.

Kansas, which a century ago became the first state in the union to pass laws regulating the sale of investments, is taking on bigger scam-fighting chores following passage in Washington of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, said Wilson.

The commission's nine-member enforcement staff previously kept a regulatory eye on about 122 investment advisory firms in the state, and the new legislation adds about 40 firms to its purview. The new ones are so-called midsize firms that the U.S. Securities and Exchange Commission theoretically watched—but in reality didn't—because watching Wall Street consumed too many resources. So now, Kansas' nine securities cops are guarding $2.3 billion of our investments instead of $866 million before.

One thing hasn't changed, however, Wilson said: Good offense is still the best defense against investment scams. Also, asking the right questions may help you make better investment decisions in addition to avoiding rip-offs. That's a big plus, because securities regulators can't do anything about the poor choices we make. They can act when someone breaks laws to cause us to make poor choices. You don't need an Ivy League MBA to protect yourself:

Be firm. It's OK to say no to someone who is trying to sell you something you aren't sure of.

Be skeptical. Check out references and credentials, get details in writing about how things are supposed to work, and beware of anything that promises really big returns for very little risk.

Be in charge. Know how to get out of an investment if you want to, and what that will cost. Keep close track of what's being done with your money, and ask tough questions.
Some of the tough questions are basic:

Is the offer registered with federal or state securities commissioners? In Kansas, you can call the state securities commission at 800-232-9580 to find out.

Why is this investment suitable for me? Whoever is offering the deal should be able to tell you clearly how it will help increase or preserve your wealth to meet your needs.

How does it work? You need to know whether it requires dividends, interest, or an increase in value to make money for you, and what must occur in the market for that to happen.

What does it cost? You need to know what additional fees and costs will occur, in addition to your initial investment, both to get into the deal and to get out again.

How much money could I lose? There are two issues to explore here. One is liquidity, which is how quickly and at what cost you can pull out of the investment. The other is knowing how much in total you risk losing if the investment fails completely, and what circumstances would make that happen.

Securities regulators have treasure troves of free material to help you sort out broad questions such as these, as well as specific questions that are likely to come up, such as how to check out a broker, sales representative, or investment firm. Some of the most useful resources:

Senior Investor Resource Center
www.nasaa.org/investor_education/senior_investor_resource_center/440.cfm
Investor education packet
www.ksc.ks.gov/packet.html

Top investor traps
www.ksc.ks.gov/TopInvestorTraps2010.html

How older citizens can avoid investment fraud and abuse
www.ksc.ks.gov/edu/older.pdf

Questions you should ask before you invest
www.sec.gov/investor/pubs/askquestions.htm

Advice for investors
www.ksc.ks.gov/edu/advice.html