Could Medical Science Explain Why Older Investors Are More Susceptible to Scams?

by Wall Street Fraud on December 17, 2012

Elder financial fraudMedical science may explain why the elderly are more likely to fall for an investment scam. A new study suggests that changes in the brain that occur as we age make it more difficult to detect unscrupulous individuals.

As Reuters reports, the researchers performed a series of tests to compare the perceptions of trustworthiness among younger and older subjects. They found that the older subjects often missed signs of suspicion when shown a series of photographs.

“It's that 'uh-oh' response that people get," said Shelley Taylor, who directs the University of California, Los Angeles Social Neuroscience Laboratory. "The younger adults are getting that and the older adults are not."

When the researchers compared the brain scans of the subjects, they also detected differences between the younger and older groups. The brain scans of the younger subjects showed a lot of activity in the anterior insula area of the brain when they were shown pictures of untrustworthy individuals. There was little to no brain activity in this region in the older subjects.

The particular area of the brain is responsible for interpreting sensations in the body that form "gut feelings," lead author Elizabeth Castle explained. "We saw that older adults didn't get the same level of insula activation that the younger ones did," Taylor added. "It should be telling them this looks risky, this looks iffy."

Given that adults over 60 lost almost $3 billion to financial exploitation in 2010, the study findings are an important piece of the puzzle. They not only help explain why older investors may not be tipped off to a potential fraud, but can also inform outreach and educational efforts to deter it.

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