Investing and Unknown Unknowns

 

In 1999 David Dunning a Professor of Social Psychology at Cornell, produced a study which developed the Dunning-Kruger effect; which basically states that our incompetence masks our ability to recognize our incompetence.

Dunning has long purported that the sign of intelligence is tied to the ability to realize that there are things that you don’t know that you don’t know. Donald Rumsfeld gave a speech on Terrorism in which he was lambasted by the media for the following comments: There are things we know we know about terrorism. There are things we know we don’t know. And there are things that are unknown unknowns. We don’t know that we don’t know.

Being confident about unknown unknowns is one of the core principles behind financial victimization. When investors do not have the ability to recognize their own incompetence in the area of financial decision making they are easy prey for scams and fraud.

No one wants to admit to weakness, we all believe we are better than we truly are. It is a common thread in the trends of human nature. The most prolific danger however exists within the unknown unknowns as this characteristic will ensure our loss consistently.

The blind spot in assuming the unknown leaves one susceptible to manipulation. As an example when I was selling Life Insurance I would often have to work through CPA’s or CFO’s and they would often be a major stumbling block to getting deals done. My method with them was to simply drop a few well designed concepts with their lingo which made them feel that I was their equal when it came to the knowledge of their expertise. This of course was far from the truth but this bluff ALWAYS worked. It worked because these professionals simply knew what they knew and had no awareness that there were things they didn’t know such as being able to have their beliefs manipulated. It is much the same for investors and consumers.

When you gain a small bit of knowledge this is usually extrapolated into your believing you know well more than you truly know. When this happens you are totally blinded to the unknown unknowns because your beliefs are locked into the known. The conman knows how to play the unknowns and also how to manipulate the unknown. Just a few well-placed questions can uncover just what you know and more importantly what you don’t know. Please remember it is always what you don’t know that is most dangerous. Even when investors develop a process for the completion of due diligence they often will miss key issues because they do not know the necessary questions to ask.

Acknowledging that there are unknowns as well as unintended consequences behind every decision will help you develop a better decision making process. Never be afraid to admit there are unknown unknowns which will allow you the open-mindedness to seek the best answers.

One of the major aspects of counter-intuitive thinking is the knowledge of being unaware. Most people are familiar with being aware of something, yet the counter-intuitive mindset is the understanding of the sense of being unaware, in other words being aware that there is information and knowledge that one doesn’t know. You know you don’t know. That is truly counter-intuitive and that thought process is very important in protection from financial victimization. It might just be the armor one can wear to be fully protected against all forms of financial victimization.

YOUR Best Interest Is OUR Only Concern!

Voters being targeted by scams during election season

By Joyce Ogirri, News 8 Producer

CROMWELL, Conn. (WTNH) — Connecticut Better Business wants to warn you about scams being reported across the country, now that its election season.

You can expect calls from polling firms, charities and political parties at this time of year. But you have to make sure you do not give your personal and financial information to the wrong person.

Here are some of the ways criminals are trying to get your information:

Phony fundraising, they will ask you to make a donation. Contact the political party directly or through their website if you want to offer financial support.
Fake public pollsters, the first few questions sound legitimate. But shortly after, they tell you that you are eligible to win a prize for your participation. Polls do not work that way. This is a way they try to get your credit card number for shipping, handling or taxes on the prize.
Do not believe offers to re-register you as a voter. In this case, they are looking for personal information.
There is no such thing as vote-by-telephone opportunities. You may also receive this solicitation by email too. It is fraud, so hang up the phone or delete the email.

The reality is scams are fairly common, yet those who perpetrate them are creative. The concepts are pretty much fundamental yet like flavors of ice cream there are blends. If you understand the basic fundamentals along with the common behavior traits as well as your own at risk behaviors, then you have a formula to consistently protect yourself and your loved ones from all forms of scams, fraud and predatory sales tactics. Well too many people allow this risk to go unnoticed and unprotected. In a notion where over $250B per year is lost to all forms of financial victimization we can’t possibly ignore the exposure to this risk. Financial victimization represents the most damaging financial risk you will ever face, so what are you going to do about it? 

YOUR Best Interest Is OUR Only Concern!

What are you waiting for? Just 65 cents per day provides you and your loved ones with full inoculation and insulation against all forms of financial victimization.

The Lottery Scam

One of the clearest examples of why the Advocacy Network is such a necessary service is the lottery scam. Most are familiar with the so called Nigerian chain letter and such, but the Jamaican Lottery is a multi-billion dollar scam perpetrated upon Americans every day. Yes it is hard to believe that anyone would fall for this scam, yet highly educated and very sophisticated people fall victim to this scam each and every day. The phone rings in American households regularly with the GREAT News of having won a multi-million dollar lottery.

Just like winning the Publishers Clearing House the appeal is to good to ignore. I recently watched a documentary on the depth and reach of the Jamaican lottery scams. It was even more devastating then I had imagined. To date we have saved members in excess of $6M and the Jamaican lotteries have pulled in 100’s of BILLIONS!

The psychological triggers are all put in play for this scam which is mainly perpetrated via the telephone. (There is a few versions via email as well) Those who receive these calls are already identified as being highly susceptible to this type of scam. In case you are not aware there are lead lists commonly referred to as sucker lists. The way you end up on one of these list is through email and mail offerings in which you willing provide information and possibly a few dollars ($2,$5,$10,$15 or $19) these offers could be for information, contests or other games of chance. Once you respond it immediately identifies you as a potential victim. At this point I must sadly say you have one foot in the grave for victimization.

The boiler rooms purchase the lead lists and make the calls. “Congratulations YOU have won ——-Lottery! Do you know how much you have won in CASH and PRIZES? (when you answer this question you are being turned) Wow you have won $19M dollars in the lottery and another $375K in cash plus a 2016 Mercedes (pick a class). So, lets discuss how you can claim your winnings and prizes. There are a series of taxes and expenses needed to claim this bounty so let me explain.

I won’t continue to provide you the rest of the phone call but I will tell you of one very sad story. There is an elderly widow (many of these scams are perpetrated upon the elderly and lonely) in N. Dakota who received the call and decided to take a chance on the first small payment required for claiming purposes, this payment was $3,000. Now, that can sound like a great amount or possibly a small amount depending on your perspective of money. The next stages of payments she made were $14,500, $21,000, $37,000, $59,000 and even one cash transfer in excess of $100,000. All totaled over a period of 5 months she paid out over $400,000! which was her entire retirement fund plus Life Insurance received on the passing of her husband of 61 yrs. Before you say WOW, that would never happen to me, understand that this lady was a long time business owner and fairly savvy with money. She fell victim to hope which escalated into greed and this is something that can happen to each and every one of us. Everyone is susceptible to this type of psychological manipulation, of course some people are more susceptible. (At the Advocacy Network we have designed a quiz that will identify just how susceptible you may be to financial victimization).

The best solution is a basic membership with the Advocacy Network, we will fully inoculate and insulate you from all forms of financial victimization. We can make it virtually impossible for anyone to victimize you and your loved ones. The most incredible point is that membership is less than 65 cents per day. Let me repeat that 65 cents per day to be fully inoculated and insulated against scams, fraud and predatory sales tactics. Let me ask you would it be prudent to remain exposed to this massive financial risk or simply invest 65 cents a day for proactive protection?

What are you waiting for?

YOUR Best Interest Is OUR Only Concern! 

Beware the first name basis!

As a uniquely positioned financial network the Advocacy Network provides a wide range of financial literacy education as well as the psychological triggers commonly used to victimize people financially. Here we discuss a common sales manipulation used by scammers and sales professionals. 

One of the exceptionally useful psychological triggers is the simple use of a person’s first name. Our first name is an incredibly powerful emotion initiator. We all enjoy being recognized and our name is a powerful acknowledgement of our identity.

The ego is massaged when you are called by your first name. The last name isn’t nearly as effect as it doesn’t trigger the same emotional impact. Remember back in HS when the teacher might have called you by your last name, it wasn’t quite symbolic of your identity within the group, but getting that call on the first name created a warm stream of good feelings didn’t it?

Sales people have long been trained to use a prospect’s name in order to develop a camaraderie or sense of association. Once you have passed the threshold of trust it is quite easy for someone to use persuasive triggers to get you to make a decision. Financial decision making is one of the most important processes an individual faces. Mistakes with money are common and many times these decisions are gravely impacted by a process of manipulation.

This key manipulation trick has been used for centuries by those wishing to separate you from your money. Now, let’s be clear the psychological triggers are not always used for manipulative purposes yet it is vital that you understand what the psychological triggers are so you can determine if they are being used to manipulate your decision making process. It is always what you don’t know that is of the greatest potential harm to you.

The other difficulty is that much like hypnotism your behaviors become an unconscious event and are grooved in which make it quite difficult to defend against these behaviors. You have developed a financial decision making process whether you are conscious of it or not. All that needs to be done to manipulate this decision making process is for the other person to identify your process. A few key questions at the right time can easily identify anyone’s process.

The first barrier to cross is rapport. This barrier is the initial protective shield everyone puts up. It is the easiest of the shields to pierce and it also triggers the unconscious defense mechanisms to stand down. The most common trigger to use is the person’s first name. Upon crossing this barrier there is immediate rapport and a sense of ease within a conversation. If it is being used for manipulation you will find your name attached to certain concepts the manipulator is seeking to associate with your strong emotional state triggered through the use of your name. The manipulator will bracket you name around the decision making question when the time comes to close the deal. The only one capable of short circuiting this process is you. The only protection you can create is a total knowledge of your financial decision making process and a conscious awareness of what the psychological triggers are and how and when they are used.

The Advocacy Network inoculates and insulates our members against scams, fraud and predatory sales tactics. At the base of our work is the new book “You Might Be Getting Scammed When….” You can be totally inoculated and insulated against scams, fraud and predatory sales tactics and consistently make smart decisions about money.

YOUR Best Interest Is OUR Only Concern!

When it doesn’t hurt to take a deal from FINRA

Below you can see an article directly from an industry journal. This displays how some consistent sales manipulators can stay in the industry (this validates why you can’t rely on FINRA to protect your best interests at all times)

While I have no idea what they may propose, you would most likely be able to respond with a counteroffer of a lower fine and a shorter suspension. FINRA would respond by either accepting the counteroffer, rejecting it or proposing their own counteroffer. It’s unlikely they’d go back and forth much beyond that.

The likelihood, however, is that the final offer would be something less than their original proposal. At that point, you would either work out a settlement or reject their final offer.
If either you or FINRA reject the other’s final offer, you’ll face the same situation you would be in if you had declined to discuss settlement in the first place.

In that case, FINRA would file a Wells notice indicating they will seek enforcement action. They will seek to take your testimony in a deposition, then schedule a hearing before an officer.

If you decide to cooperate, you will have to appear for testimony and before the hearing officer. Depending on the strength of their case, if the officer were to find against you, he could very likely impose whatever sanctions FINRA is seeking.

In that case, you would have no opportunity to negotiate for a lower sanction.

If you decide not to cooperate, FINRA will proceed with the hearing anyhow, and, in light of your non-cooperation, they will most likely impose a lifetime ban.

Consequently, entering into settlement discussions with FINRA has the best chance for the most positive outcome. Even if, at the end, you do not want to accept their settlement offer, there is nothing forcing you to do so. At that point, you’d be no worse off than if you’d told them you don’t want to discuss settlement at all.

Q: I have a friend who’s a registered investment adviser. He mainly deals with mutual funds, so when he has a client who wants to trade equities, he refers them to me. I want to pay him a referral fee, but my compliance office says it’s not permitted. Why is it that the adviser can pay me a referral fee when I send him someone, but I can’t pay him a referral fee?

A: There is a difference between your friend, as a registered investment adviser, paying a referral fee to a person acting as a solicitor for referring him an advisory client, and you paying him what amounts to transaction-based compensation for investing in a particular security.

In your case, you would be paying the adviser a percentage of your commission, which is transaction-based compensation. In order to receive that payment, your friend would have to be a registered representative of a broker-dealer.

However, when you send him a client, he’s only paying you a percentage of the fee for the advisory services. The referral compensation is not tied directly to an investment in a particular security.

However, when you send him a client, he’s only paying you a percentage of the fee for the advisory services. The referral compensation is not tied directly to an investment in a particular security.

Note, however, that even in the case of a solicitor, most states require that the solicitor be registered as an investment adviser representative, either of their own advisory firm or of the advisory firm they are soliciting for.

Florida, however, is one of the few states that doesn’t require a solicitor to be registered as an investment adviser representative, as long as the solicitor otherwise complies with the federal solicitor rule.

YOUR Best Interest IS OUR Only Concern!

What are you waiting for?

Selective Memory

The dangers of overconfidence lead to a vicious cycle of continued negative behaviors that greatly impact investing success. One of the bi-products of overconfidence is selective memory. Very few of us like to remember painful experiences especially past failures. The inability to use failure positively contributes to a distinct avoidance of failure.

This avoidance directly advances selective memory. We chose to remember only the positive aspects of our past decisions which reinforce our positive self-image. We tend to avoid any realities of the pain caused by loss or poor decisions about money. This create a vicious cycle and puts us much like a hamster on a wheel going round and round using the identical flawed decision making process which caused our original pain.

Selective memory becomes a key reason why victims of scams have a multiple history of being scammed. Yes there are other major factors in becoming a serial victim but selective memory is a core element in this process.

This selective memory process is a form of correcting for cognitive dissonance which is a well-accepted theory in Psychology. This theory suggests that holding two apparently disparate ideas, opinions, attitudes, beliefs or behaviors at the same time and therefore our psyche will need to find a correction for this.

Over time we will correct to ensure that the memories are congruent with our self-image belief. We need to adjust the reality to conform to our own comfortable self-image.

We also are guilty of pacing too much weight on the recent short-term evidence while making decisions and ignoring long term evidence that adds weight to our risk analysis.

The best way to overcome this negative behavior trait is to journal your decision making process when making an investment. This will leave a permanent record of your attitudes, beliefs and values at the time of the investment. This record will allow you to determine the true value of the investment decision and whether your decision making process was sound at this time.

YOUR Best Interest Is OUR Only Concern!

Anchoring and Decision Making

The cognitive bias that describes our common tendency to place too much emphasis on one trait or piece of information when making a decision is called anchoring. This occurs during the normal decision making process when we rely too heavily on a specific piece of information which governs our thought process.

Once the anchor is stamped in our mind there is a bias set towards adjusting all information to reflect the anchored information. This cognitive bias is often developed at a young age when it is reinforced through our learning process.

Anchoring has a strong impact on our beliefs about money. The financial decision making process an individual moves through is reflective of their perception of money. For example, a person looks at investing in a company they may focus excessively on a certain element of fundamental analysis and use those criteria as a basis for evaluating the value of the investment, rather than considering all the proper elements of complete due diligence. The bias will cause the investor to view all future information in a manner that reinforces their decision.

These decision traps commonly lead to investors staying too long with an investment as well as developing a very large blind spot with regards to the initial investment decision.

Understanding the psychology of your decision making process will allow you to eliminate pre-conditioned bias’ which reduce your probability of making successful financial decisions. Awareness will also help you develop an objective decision making process.

Scam and fraud victims are manipulated through the knowledge and experience their perpetrators have in the field of psychology. In order to insulate and inoculate yourself fully you must understand the psychology behind your financial decision making process. You don’t stand a chance if you haven’t gained full awareness of your anchors. Believe me when I tell you that the professional scammers and fraudsters will find your anchors very quickly and devise a strategy to use to their best interests.

Your focus points for this concept are simple; return to your journal and review your last 5 investment decisions. Take the time to reflect on the answers to several questions:

  1. What is the most important aspect of an investment for me?
  2. What is my due diligence process?
  3. What must an investment not have that makes me decide to say no?
  4. What must an investment have for me to say yes?
  5. Why do I want to invest?

YOUR Best Interest Is OUR Only Concern!

Former NFL linebacker and ex-wirehouse adviser ran $10M fraud, SEC charges

As you read this, ask yourself if you might have been taken in by the former celebrity of an ex NFL player, and if you were a fan of his particular team would you have been more likely to buy into this credibility link?

A former linebacker with the Philadelphia Eagles used the life savings of football coaches as a “personal piggybank” to fund a $10 million fraud, according to charges from the SEC.

The commission is seeking to permanently bar Merrill Robertson Jr., also a former broker with Merrill Lynch, and his alleged co-conspirator, Sherman C. Vaughn Jr., from the industry, as well as demanding the return of funds allegedly taken from investors. Robertson and Vaughn could not be reached for comment.

Robertson, 36, played for the Eagles from 1999 to 2001, according to virginiasports.com. He worked for Merrill Lynch in Richmond from 2008 to 2009. Vaughn, 45, holds a bachelor’s degree from Virginia Union University, the SEC says, although he portrayed himself online as a “doctor” and a commercial real estate investor. Both live in Chesterfield, Va. Vaughn was never a registered broker or investment adviser, according to the SEC.

HIGH RETURNS PROMISED

Aside from a few restaurant investments that failed in 2014, most of the business activity purportedly undertaken by the two men’s firm, Cavalier Union Investments, was entirely fictitious, the commission says in its complaint filed in federal court in the Eastern District of Virginia on Aug. 10.

[Image: Newscom]

“Cavalier did not have any divisions, investment funds or investment advisers,” the complaint says. “Nor did it have a diversified investment portfolio. Cavalier was functionally insolvent shortly after it was formed and it relied on cash from investors to stay afloat and pay investors who requested their money back.”

To win over prospects, Robertson and Vaughn promised fixed rates of return of between 10% to 20% on the largely nonexistent investments, while also promising “safety and security” for investors, the complaint says.

In all, Robertson and Vaughn misappropriated nearly $6 million of investors’ funds to pay for their “luxurious” lifestyles, which included high-end clothing, vacations and spa visits, according to the commission.

The funds came from unsophisticated senior citizens as well as alumni of and football coaches at schools Robertson had attended, including the University of Virginia and Fork Union Military Academy in Fork Union, Va., says the SEC.

Online sex crimes ‘overtaking financial scams’, say experts

Updated: August 7, 2016 08:29 AM

ABU DHABI // Online sex crime is overtaking cyber financial cons such as phishing — where people may be duped into sending strangers their bank details.

David Michaux said: “People have got used to the financial scams that are going on and we are now moving away from that.”

In the UAE, Mr Michaux, said victims were predominantly being targeted through the business-orientated social networking service LinkedIn.

“The con artists will go through the site, search for people who are in prominent positions and when they find these people, they go through who their friends are on LinkedIn,” he said. “Then they will look at their interests and they will go back and create a profile that they think will appeal to [their target] personally.”

The scammers will then start befriending the friends of their victims before approaching their target directly, he said, first on LinkedIn, then using other social media such as Facebook.

“Once they are friends on Facebook then, basically, they start chatting on Facebook Messenger,” said Mr Michaux.

“Then it turns into slightly more ‘erotic’ Skype chats, using webcams.”

However, victims were often being recorded as they exchanged explicit messages or material and were then open to blackmail over the content.

“We have seen amounts of US$5,000 (Dh18,400) up to $25,000 (Dh91,000) demanded,” said Mr Michaux.

Some blackmailers were more elaborate with their scams.

“In the worst cases we have seen, when some people are exchanging messages the scammer sends a Trojan – a type of malware used by hackers – to the person’s PC and they take over the person’s Facebook account and everything else for a ransom,” Mr Michaux said.

Threats have also been made that the videos would be sent to friends and family of the victim.

Mr Michaux said his firm had been contacted by authorities to help with investigations into such scams and also by individuals asking for help. It gets anything from five to 10 requests for help on such matters each month.

Most of the blackmailers work from South-east Asia, said Mr Michaux, who said teams operating out of a “type of call centre”.

Victims could be of any nationality and be of either gender, he said, although he believed the breakdown was about 80 per cent male, 20 per cent female.

“More awareness is needed in this,” said Mr Michaux. “If someone approached you who is unknown you need to be wary.

“If you use Skype and you see messages pop up from people you don’t know – these types of pop-ups are usually the start to a scam.”

Eric Eifert, senior vice president of managed security services at UAE cyber security company DarkMatter, said extortion was a growing problem.

“These include threats of disclosing sensitive information publicly unless a payment is provided,” he said

Padmanabhan S V, chief technology officer at Noor Bank, said harassment or financial blackmailing on social media was an increasingly prevalent cyber crime. “Besides the emotional burden this causes, victims can face financial implications or get embarrassed by having their private data leaked publicly.”

Karl Schilling: As we have long contended the most effective protection against all forms of financial victimization is the development of awareness and then the process of providing on going education in order to provide proactive preliminary protection. The lack of awareness has been the weapon of choice for the illicit perpetrators of scams, fraud and predatory sales tactics. We live in a time period where making connection with people is simple. The extension of social media and other forms of immediate communication provides a wide open architecture for scams, fraud and the sales manipulations. One of the powerful tools used is what is now being called “authority marketing” which allows for anyone to create an attractive platform of personal authority. The best protection against this is due diligence and the Advocacy Network membership provides complete due diligence services. We are the watchdog service that consistently asks the right questions in order to eliminate any risk of financial victimization. Our members have saved in excess of $6M in potential losses to date. For less than 65 cents per day you and your loved ones will be fully inoculated and insulated against all forms of Financial Victimization.

What are you waiting for?

YOUR Best Interest Is OUR Only Concern!

Look for Authority when Seeking Protection

When you are seeking to protect you and your loved ones in any circumstance, you want the best. Of course you do, why would you settle for anything less then the best? The fact is the Advocacy Network is the authority when it comes to fully inoculated and insulating you, your family and your business against scams, fraud and predatory sales tactics. We stand out in the world of white noise and incompetence.

The obvious risk is scams and fraud. Amazingly a great deal of people are victimized everyday. With all the supposed media and available information the number of victims continues to rise. Last year the losses to all forms of financial victimization were estimated at $250B. That proves the incredible level of risk YOU are exposed to. There is no shortage of scams and fraud.

However the most prevalent financial losses come with little to no fanfare. This is the form of predatory sales tactics, the silky sales presentation that leaves you with a service, product or solution you don’t need or you pay too much for. Every day you and your loved ones have to make decisions about money in some form. Those decisions will ultimately determine your future financial path and well-being. Making smart decisions about money requires a complete awareness of your financial behaviors. This includes your beliefs, values and perceptions about money. This behaviors are below the conscious level and as such they are actually habits. Becoming aware of these behaviors will allow you the opportunity to make the necessary changes to reinforce and assure making smart decisions about money in all financial decisions.

Being a member of the Advocacy Network will provide you with not simply protection but awareness of these vital concerns and we will provide you and your loved ones with the gameplans to change behaviors and consistently make smart decisions about money. Why would anyone consider 65 cents a day too much to assure full inoculation and insulation against scams, fraud and predatory sales tactics? What are you waiting for?

YOUR Best Interest Is OUR Only Concern!