How To Tell If a Financial Pitch Is a Scam or Legitimate

Americans lost an estimated $47 billion to scams in 2024 alone, with investment scams draining at least $5.7 billion from victims’ pockets. But here’s the twist: it’s not elderly people who get duped most often. Younger adults are actually 34% more likely than older adults to lose money to fraud.

Before you trust that next “can’t miss” investment pitch, you need to know how to spot the difference between a genuine opportunity and an elaborate deception designed to empty your bank account.

How Today’s Scammers Are Getting at Your Money

Here are the most common schemes, according to U.S. Federal Trade Commission data:

• Impostor scams: Scammers impersonating trusted figures like bank officials or family members using text messages or, most concerningly, AI voices cloning technology. A common approach is to create fake emergencies to pressure you into sending money immediately.
• Lottery or prize scams: You receive a message saying you’ve won a lottery or sweepstakes, but before you can claim your prize, you’re told to pay upfront fees or taxes. Similar frauds promise grants, loans, and other financial windfalls in exchange for a fee.
• Phishing, smishing, and vishing: These are attempts to steal your personal or financial information through fake emails (phishing), text messages (smishing), or phone calls (vishing). Scammers may direct you to fake websites or hack or spoof legitimate business email accounts to trick employees or clients into sending money or sensitive information.

Red Flags of a Scam

• Upfront payment requests for prizes, loans, or investments.
• Pressure to “act now” or miss out on limited-time offers.
• Guaranteed high returns with zero risk (impossible in legitimate investing).
• Unusual payment methods like gift cards, wire transfers, or cryptocurrency
• Requests for login credentials or remote access to your devices.

How To Avoid Getting Burned

Research the Offer

Before investing a single dollar, research everything. Check the SEC’s EDGAR database for company filings, search for complaints online, and verify the background of anyone pitching you. Real companies have extensive paper trails—scammers create convincing sites with minimal substance, though AI is helping them put up far better façades than just a few years ago. 

Verify Credentials Like Your Money Depends on It

Use the SEC’s Investor.gov tool to confirm that investment professionals and firms are licensed. Many scams involve unlicensed individuals or unregistered firms promising insider access or exclusive deals.

Get Professional Advice

Consult with a licensed financial advisor before making any significant investment. They can spot red flags you might miss and assess whether an opportunity fits your actual financial goals and risk tolerance.

Protecting Yourself from Scams

If You Think You’ve Been Targeted

1. Stop all contact immediately and document everything—screenshots, emails, phone numbers.
2. Report it fast: Contact your local police and state attorney general, and file a complaint with the FTC at ReportFraud.ftc.gov.
3. Call your bank or credit card company immediately: Time matters—the faster you act, the better your chances of recovering funds.

Securing Your Accounts

• Never share login credentials or give remote access to your devices.
• Be suspicious of unusual payment requests—legitimate businesses don’t insist on gift cards or cryptocurrency.
• Verify any urgent requests using contact information you know is real, not what the caller provides.
• Talk to someone you trust in person before making any financial decision under pressure. Scammers use isolation and urgency to bypass your better judgment.

The Bottom Line

Always research any investment opportunity independently, verify the registration and licensing of the company and the individual offering the pitch, and never hesitate to ask tough questions. Be wary of high-pressure tactics, promises of guaranteed returns, or requests for unusual payment methods; these are classic red flags. 

If something feels off, slow down and seek a second opinion from a trusted, registered financial advisor. Stay alert, slow things down, remain cautious, and always put your financial security first.