Fraud Protection: Avoid the Next Madoff

• Targeting of a person with cognitive impairment. Many swindlers target people whose mental sharpness may not be what it once was. Fraud merchants also go after the most vulnerable — women between the ages of 80 and 89 who live alone and need help with activities of daily life, according to the MetLife Institute. The cost to this group is nearly $3 billion annually.
  
  The flimflam artists know that most older investors buy on trust alone. So there's one simple rule for you to follow: If you can't fully understand how an investment works and all of its downsides, then don't invest in it.

• Shady marketing. Check out telemarketing, direct mail and "affinity" (social group) pitches. Skepticism is one of the best forms of caution. Keep talking to your loved ones, friends and neighbors. The best form of protection is vigilance.

Key resources to help you detect and combat fraud:

• Investor Protection Trust. It offers a helpful video on investment fraud among older people. Also see the IPT elder investment fraud program.

• FINRA. This securities industry regulator has a host of resources that provide investor alerts and broker/adviser background checks.

• Financial Planning Association. This group can provide basic financial advice and help you locate a certified financial planner near you.
  

Also of interest: How to check if your broker's company is legit. >>

John F. Wasik is a personal finance columnist for Reuters and the author of The Cul-de-Sac Syndrome (www.johnwasik.com) and 12 other books.