The economic downturn has made Canadians more vulnerable to fraud, and financial advisors should help protect their clients by informing them of the risks, says Jay Stark, vp of fraud management at RBC Financial Group.

March is Fraud Prevention Month, and this year it comes at a time when many Canadians have recently lost large portions of their invested assets in recent months, and many others have lost their jobs. This makes Canadians more susceptible to scams offering investments with hefty returns or jobs with sizeable compensation, and an increasing number of scam artists are exploiting this vulnerability, Stark says.

“In this economy you start to see more of those come to fruition,” he says. “We’re seeing more of the job scams and the investment scams.”

For example, fraudsters seeking to take advantage of newly unemployed Canadians may advertise ways to earn money from home, or lucrative payment-forwarding scams that involve accepting and transferring money from one bank account to another. Some scam artists also scan the Internet for resumes and contact job-seekers directly with such schemes.

Also on the rise are scams that advertise safe investments with unusually high returns.

“If it seems too good to be true, it is,” Stark says.

Often, investment schemes attempt to appear plausible by offering investors “special access” based their relationship with a mutual acquaintance or affiliation with a specific religion or ethnic group, according to Stephen Horan, head of private wealth at the CFA Institute.

Other schemes might promote investment strategies too complex for investors to understand. “Some investment opportunities appear alluring simply because they are described in impressive, complicated terms,” Horan says.

In the wake of the recent market decline, investors seeking to make up their losses could be more easily drawn in to such attractive offers.

Advisors have an important role to play in informing clients and warning them about such scams, according to Stark.

“The biggest role would be to get the appropriate messaging out to the client on how clients can protect themselves,” he says.

When dealing with clients at greater risk of being victimized, advisors may need to be more aggressive in communicating the risks, Stark adds. In particular, seniors are generally targeted more than other demographics, so it may be necessary to spend extra time cautioning such clients.

“You have to keep an open eye and ask them questions,” he says. “A good investment advisor and a good bank would ask those questions and do their best to ensure their clients aren’t victimized.”

Discussing fraud may be challenging with some clients, Stark adds. Some victims may be secretive about schemes in which they’ve participated if fraudsters have told them not to discuss it, or if they’re convinced they will receive significant returns.

“A victim might not want to disclose all the details because they are getting a sizeable windfall,” he says.

IE