The Emotional Edge of Financial Predators - A Four Group Longitudinal Study

Abstract

In the last few years, a number of investors of all walks of life have been duped by their once-trusted financial advisors. Despite warnings by regulatory bodies such as the Security Exchange Commission (SEC) or educated reports published by acclaimed newspapers and magazines (e.g. Barron’s in the case of Madoff), people still get caught in the likes of Ponzi schemes. The question is why? This paper hypothesizes that a large part of the blind eye turned onto financial advisors and brokers finds its source in emotion, and most particularly, primitive emotion. A four-group longitudinal study (one of very few in the domain) spread over six months shows that people engage in financial negotiation with their hearts and guts, not only with their thoughts and calculators. This may be an explanation as to why citizens end up losing their life savings to the hands of remorseless financial predators.

Keywords: Perceived predation; consolidated model of financial predation (CMFP); predator; prey; affinity