Vanguard reveals why smart investors still fall for scams

You probably consider yourself a careful investor who would never fall for an obvious scam or a suspicious promise. Fraudsters are counting on exactly that confidence, because overconfidence is one of their favorite entry points into your accounts.

A new report from Vanguard pulls back the curtain on the emotional and psychological tricks that scammers use against investors.  The findings come from two of the firm’s top experts: Andy Reed, head of behavioral economics research, and John Ginelli, head of Vanguard Investor Protection. 

Their insights reveal a disturbing truth: your brain can become your biggest financial vulnerability. The techniques they describe have nothing to do with hacking or technology and everything to do with human nature itself. You might be surprised at how easily these tactics can bypass even the sharpest financial mind.

Your brain is wired to trust first and verify later, and scammers know it

The core finding from Vanguard’s report is deceptively simple yet deeply important for every investor to understand. When you experience a strong emotion like excitement, fear, or panic, your brain’s rational processing essentially shuts down.

Reed explains that two decision-making systems operate in your brain at all times when you make financial choices. The first is fast, emotional, and instinctive, driven by gut reactions that helped our ancestors survive dangerous situations. The second is slow, rational, and deliberate, responsible for evaluating numbers, probabilities, and logical risk assessments.

Related: Protecting America’s Retirement Savers from Scams and Fraud

The problem is that the fast emotional system always fires first, giving scammers a critical window to manipulate you. By the time your rational brain catches up, you may have already clicked a link or transferred funds somewhere.

Reed shared a personal example that makes this research feel uncomfortably real for anyone reading about it today. He received a threatening email that included a photo of his home taken from the street. His immediate reaction was a deep, visceral sense of panic before reason eventually kicked in and identified the scam.

Scammers target baby boomers and older investors for a specific financial reason

The scale of this problem is staggering when you look at the actual dollar figures reported to federal agencies. Americans lost more than $12.5 billion to fraud in 2024, representing a 25% increase over the prior year, according to Federal Trade Commission data.

Key fraud statistics from the FTC:

Investment scams alone accounted for $5.7 billion in losses during 2024, a 24% increase from the prior year.The percentage of people reporting financial losses from fraud jumped from 27% in 2023 to 38% in 2024.Older adults aged 60 and over lost $2.4 billion to fraud, up from $600 million in 2020, per the FTC’s older consumer report.Email was the most common contact method scammers used, followed by phone calls and then text messages.

Ginelli points out that seniors face a unique combination of vulnerabilities that make them especially attractive to scammers. Many older investors experience loneliness after losing loved ones, creating an emotional need for social connection and companionship.

Baby boomers hold over $85 trillion in combined wealth, according to Federal Reserve data, making them the wealthiest generation in American history. That concentration of assets makes retirees and near-retirees the most lucrative targets for organized fraud operations worldwide.

Reed adds that generational attitudes toward money create another dangerous vulnerability that scammers exploit. Older Americans often consider financial matters deeply private, making them less likely to discuss suspicious contacts.

Secrecy is the scammer’s most powerful weapon against you and your family

One of the most disturbing patterns Vanguard’s experts describe is scammers deliberately isolating their victims from their families. Once a fraudster establishes emotional control, they instruct victims to keep financial conversations completely secret from everyone.

Reed shared an especially painful personal story about his own 102-year-old grandfather, who was targeted by multiple scammers. The family still does not know the full extent of how much money he lost or how many scams victimized him. Scammers coached his grandfather into purchasing a burner phone and instructed him to make cash drops in person at locations.

Related: A Record $17 Billion Estimated Stolen in Crypto Scams and Fraud in 2025

The secrecy made it nearly impossible for Reed’s family to intervene, document the damage, or stop ongoing losses. His grandfather trusted the scammers over his own wife, son, and grandson because of the emotional manipulation involved.

Guilt and shame prevent victims from getting help

Ginelli explains that the emotional toll of being scammed often proves even more devastating than the financial losses themselves. Victims frequently experience deep feelings of guilt, shame, and embarrassment that prevent them from reporting what happened.

This silence creates a dangerous cycle that benefits scammers and harms everyone who could be warned in advance. When victims do not report fraud, law enforcement agencies cannot track patterns, identify perpetrators, or shut down ongoing schemes.

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Scammers also exploit your desire for justice and your instinct to protect the people you love from perceived threats. Ginelli describes impersonation scams in which fraudsters pose as FBI or CIA agents and request help in catching dangerous criminals.

Victims believe they are serving a patriotic duty, which makes the secrecy feel justified and even heroic in context.

Shame and embarrassment keep many victims silent, allowing scammers to continue targeting others without detection or consequences.

Grusho Anna/Shutterstock

Your personality may protect you, or it may leave the door wide open to fraud

Vanguard’s research suggests that certain personality traits can either shield you from scams or make you more vulnerable to them. People who are naturally skeptical tend to maintain that skepticism throughout their lives, serving as a form of armor.

Reed notes that the skepticism you develop early in life tends to remain relatively stable throughout your lifespan. That sustained instinct to pause and question could be the single most effective defense you have against sophisticated scammers.

On the other hand, people who are naturally trusting or eager to help others face a higher overall risk profile. Scammers specifically look for people who want to believe the best about others and who respond quickly to emotional requests.

Practical steps you can take to protect yourself and your loved ones

The good news from Vanguard’s research is that awareness itself is one of the strongest defenses against financial fraud. Once you understand the emotional playbook that scammers use, you become significantly harder to manipulate in real time.

Red flags that should trigger an immediate pause:

Any communication that creates a sudden sense of urgency, panic, or excitement about a financial decision you face.Requests to keep financial transactions secret from your spouse, family members, or your trusted financial advisor.Pressure to move money quickly through wire transfers, cryptocurrency, gift cards, or other hard-to-trace payment methods.Claims from someone impersonating a government official, bank representative, or law enforcement officer asking for money.Any investment opportunity promising guaranteed returns with little or no risk, especially those found on social media.

Proactive defenses you should build into your financial routine:

Have regular, open conversations with aging parents and loved ones about financial activity and any unusual contacts received.Verify every unexpected request by contacting the organization directly through official channels you find independently online.Set up account alerts and two-factor authentication on all financial accounts to catch unauthorized activity quickly.Check your financial advisor’s credentials through FINRA’s BrokerCheck tool and the SEC’s EDGAR database regularly.Report any suspected fraud to the FTC at ReportFraud.ftc.gov even if you did not lose money in the incident.The real lesson from Vanguard’s research is that no one is truly immune to fraud

Ginelli makes a point that deserves to be the final takeaway for every reader who made it to the end here. The belief that fraud only happens to gullible or unsophisticated people is itself a dangerous myth that scammers exploit.

Scammers play a long game with many of their victims, building trust over weeks, months, or even years beforehand. They exhaust every available financial resource, convincing victims to drain their savings, take out loans, and max out their credit cards.

Your best defense is not intelligence or financial literacy alone, but rather a consistent habit of pausing before you act. Talk to your family openly about money, independently verify every unexpected request, and never let urgency override your judgment.

Related: The $41 billion telecom fraud secret

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