7 December 2021
According to UK Finance, in the first half of 2021 an eye-watering £753.9 million was stolen through fraud, an increase of 30% compared to the same period in 2020.
While transactional “push payment” fraud accounted for much of this total, losses from investment scams were up 95% year-on-year to more than £107 million.
You may think that you’ll never be taken in by a scam. However, fraudsters are using increasingly sophisticated methods to con you out of your hard-earned wealth and so it’s easier than ever to be duped by something that looks totally legitimate.
Scams often appear entirely genuine, with websites, testimonials, and marketing material to support them. Fraudsters can even clone phone numbers, so it looks like it’s your bank or investment provider that is calling you.
Of course, these scams often leave you significantly out of pocket and, in the worst cases, could result in you losing a substantial amount of your pension or savings.
Later, read about five steps you should take before committing to any investment opportunity. First, though, here are some of the key warning signs that an offer might be a scam.
5 signs that an investment is a scam
To check if an investment opportunity is a scam, look for the following warning signs:
- You saw it on social media. UK Finance report that many investment losses result after people were enticed by adverts on social media offering high returns on investments. Worryingly, a report by the Independent found that 1 in 10 investors admitted to “taking tips” from social media and that one-fifth of adults under the age of 35 now see social media platforms such as TikTok, Facebook, or Twitter as valuable and reputable sources of information.
- You receive an unsolicited approach. This could be by phone call, text, or email. Remember that pension cold-calling is now illegal in the UK, so you should never receive an unsolicited call about your pension.
- You are told that it is a “time-limited” offer or that you have to make a quick decision. Scammers often create a sense of urgency in order that you act quickly. Genuine investment opportunities will generally not come with any time pressure.
- The firm or individual won’t let you call them back, or you are only given a mobile phone number. Alternatively, information you have received by email or text contains spelling errors, or the company’s domain is not based in the UK. If it comes from a provider you have heard of, check you can navigate to the web page you have been given from the firm’s own website.
- You’re promised high or “guaranteed” returns. These may also be sold as “low risk”.
If an opportunity looks legitimate, and none of the above warning signs have been flagged, here are five steps you should take before you part with your money.
5 steps you should take before investing
Before you commit to an investment, always ask the person who contacted you for more information. Obtain more details about the company, if it is authorised or regulated, what the firm reference number is and where it is based.
You can then do some basic checks yourself.
1. Check the Financial Conduct Authority (FCA) register
First, search the FCA register to find out whether the person or company calling you is legitimate. The register lists all the firms and individuals that are involved with regulated activities, and you can find out what they are regulated to do.
You can also use the contact details on the register to confirm you’re dealing with the genuine firm before you do business.
2. Verify the firm online
Verify the firm’s website under the name with which they operate. This is to avoid so-called “clone sites” – illegal companies who use a website or URL with a name similar to that of an authorised firm.
Look for unexpected hyphens or grammar in the website URL as these are often signs it’s not the real website.
If you’re still unsure, do a Google search for the company name and find their genuine domain. Ensure you can navigate to the web page you have seen from their main website. If you can’t find the page, it suggests that it’s not a genuine offer and you may want to do more research.
3. Check the FCA warning list
As well as checking the FCA register, you can also check a dedicated “warning list” that identifies any firms you should be wary of. There’s also lots of other handy information about investment fraud on this page.
4. Contact the company to check the opportunity is legitimate
As mentioned above, one of the red flags of a scam is that the firm or individual always calls you, and that you can’t call them back.
Make sure you contact the genuine firm directly by phone or email to double-check that it is a genuine offer. Additionally, ensure you go to the company’s main website to obtain contact details, not a web page you may have been given by the person who contacted you.
5. Speak to us
As financial planners, we’re well-placed to identify whether an opportunity you have been offered is genuine.
More than that, we can also discuss it with you to check that it’s appropriate for the level of risk that you want to take, and that it fits in with your overall financial plan.
If you don’t receive clear and complete information, or you still have doubts about an investment you have been offered, do not rush to invest at any price.
If you believe it is a scam, head to the Action Fraud website where you can report scams and cybercrime.
If you’d like to chat about an investment opportunity, please get in touch. Email firstname.lastname@example.org or call 0161 8080200.