The holidays are the time when people feel the urge to give gifts. And in so doing, people sometimes fall prey to scam artists peddling senseless items and even financial products.
So how do people fall prey so easily to scams. Here are three classic strategies lifted from the pages of the scam artist’s handbook.
First, he will impress you by looking good from his squeaky clean and shiny shoes to the salon quality hair (and makeup for the ladies). This creates the halo effect. The brain can perceive others to be knowledgeable and authoritative just because they look good. First impressions play a crucial role.
Next, the scammer will take advantage of expert bias. The scammer will build on the halo effect to appear to know the technical side to what he is selling. People are likely to feel more confident about an item being sold if the information about it comes from someone they start to believe is an expert. In contrast, aren’t you just bummed out by store clerks who cannot answer your technical questions?
The expert bias can be supported by actual demonstrations to further cement your belief that the person you are talking to is an expert.
Finally, the scammer can apply artificial scarcity by limiting the amount you can buy. I always say that the brain hates to lose. And brain activity rapidly rises when a person senses that it may be losing out on a great deal. That is why you see the phrases “for a limited time only”, “good while supplies last” or “x number of items left”.
All of what the scammer uses is called behavioral economics. As in the previous blog, the scammer is not doing much persuasion. He is only taking advantage of the brain’s predisposition, how it is naturally hardwired, to conclude a sale, and an easy one at that.
The thing with behavioral economics is that it is a double-edged sword because it can be used for doing good and bad as well. Here’s an example. If you want to find a good financial product to give as a gift during the holidays but have no clue as to where to begin, you will probably take the advice of someone who dresses sharply, exudes the confidence of an expert in his field and, because time is always an important factor with financial securities, highlights the need for you to act now.
So how do you differentiate a scam from a true offer? One simple way is to rely on screeners. These could be people who have already bought the product or service, online comments (both positive and negative), rating agencies and objective consultants. This simple extra step can go a long way in avoiding the scums of the scams.
We, your FinancePH advisors, will be glad and more than willing to help you plan your finances. Our customized financial planning approach caters to each individual needs, budgets and priorities.
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(Originally written by Efren Ll. Cruz, RFP at http://www.savingstips.com.ph)
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