Faith-based investments seek to mirror the beliefs and values of their investors, whatever their religious affiliation. These investments seek a profit like any other investment, but do so in such a way that avoids stocks of companies that violate a particular set of values held within the religion.
One of the biggest financial scams is so-called “affinity fraud” which is generally defined as scams targeting members of a specific demographic group, such as those affiliated to a particular religious organisation.
A global problem, faith-based affiliated financial services are fertile ground for con artists with losses calculated to be in the billions each year. Below are some suggestions to protect yourself from financial scams involving religion:
Faith-Based Affinity Fraud
People tend to do business with people they trust. Building trust is one of the basic requirements for having a successful investment advisory or financial planning practice. However, sometimes untrustworthy people advertise themselves as being a member of a certain religion in order to short-cut the trust issue.
Be particularly careful when dealing with anyone who contacts you from your church, mosque, synagogue or other religious affiliation regarding a sure-fire investment opportunity. You should never confuse religious faith with faith in a particular investment. Just because an investment is recommended by a religious-based financial advisor, or is supposedly based on spiritual principles, that is no guarantee it will do any better than any other investment.
One of the most disturbing facts about religious investment fraud is that many of cases relate to fellow church members who have been known by their victims for years.
Ways to Avoid Affinity Fraud
According to securities regulators, there are a number of steps you can take to protect yourself from affinity fraud. Among these are:
Check everything: It doesn’t matter how long you have known somebody, how trustworthy the person appears to be or how much scripture they can quote, never make an investment solely upon the recommendation of a member of your church, especially if the person implies that God has somehow endorsed it.
Ask the promoter if he or she is licensed with the finance authorities. You can check online for confirmation.
The old adage is true: “If it sounds too good to be true, it probably is.” Investments that promise huge profits or guaranteed returns or investments that are promised to have “no risk,” should raise a red flag.
Do not be fooled by promises of investments by others or a promise to make contributions or otherwise provide funds to your religious institution. This may be a Ponzi scheme or a high-pressure tactic to fool you. A friend or relative who made money in the investment opportunity early, may have received funds in return for a ‘testimonial’ in which to scam later investors.
No legitimate financial advisor will demand you make a quick investment decision or act fast.
If unsure, have a trusted third party such as your financial planner or lawyer, review the investment for you.