Intelligence and Financial Fraud Victimization
Abstract
This paper studies the relationship between intelligence and fraud victimization in the context of the Swedish Premium Pension (PP). The PP is a mandatory component of the Swedish public pension system that allows savers to choose from a veritable smorgasbord of several hundred funds managed by private pension fund companies. Six fund companies, which together had attracted 380,000 PP savers, were found to be not acting in their clients best interest and were thrown out of the system starting in 2016. Three of these companies and their managers were subject to criminal investigations, resulting in long prison sentences for bribery and fraud. Investors in these funds lost substantial amounts of money. Using administrative data on individual PP fund choices matched with military enlistment intelligence test scores, we find that intelligence is strongly, negatively and almost linearly associated with investing in any of these companies. Intelligence is also strongly positively associated with the probability of divesting from these firms after, but not before, the fraud has been publicly revealed. Thus, intelligence protects against being financially victimized and it is people of low intelligence that suffer the most, which will translate into widening socioeconomic gaps in retirement along lines of intelligence.
