How scammers exploit investor emotions and instincts
Ever wonder why even savvy investors fall for scams? The answer may lie in human nature and the way our brains work. Fraudsters expertly manipulate their targets’ basic human emotions and reactions to trigger a sense of urgency and push them toward trust. By doing this, they override a victim’s rational thinking before they even realize what’s happening. This article launches a two-part Q&A on the psychology of financial fraud, featuring insights from Andy Reed, head of behavioral economics research at Vanguard, and John Ginelli, head of Vanguard Investor Protection. In this first installment, the pair unpack the tactics scammers use to exploit the role emotions play in decision-making and explain why these tactics are so effective.