How to avoid investment scams

These days, robbery is unfashionable amongst criminals. The rewards are limited and the risks are high. Criminals prefer the reduced risks and greater profitability of scams.

A scam is any fraudulent scheme or operation designed to trick people out of their cash, property, or personal information. Scams can take many forms, but they all share one ultimate goal: to take advantage of people’s trust to part them from their money.

There have probably been scammers since before the invention of money. These days, with the internet providing anonymity as well as opportunity the scope for scams has mushroomed – and a particularly fertile field for scammers with eyes on your money is investment. You want to grow your money by investing it – scammers know ways to convince you to invest it with them.

Scams are on the increase

With money tight for many people, the chance of finding a lucrative investment that could provide a solution to financial worries has become very tempting. Households up and down the country are feeling the pressure from the rising cost of living, leading to many saying they would be willing to take more risks to make money.

Research from Nationwide Building Society suggests that more than 61% of people would agree to an investment promising to double their money in a year, with 8% agreeing to invest straight away without doing any of their own research to avoid missing out. The lure of big returns can be very tempting, but people can lose life-changing amounts to investment scams.

Scammers are very good at what they do. The difference between a sound investment proposal and a scam designed to whisk your money away so it is never seen again can be hard to tell until it is too late.

But it is not just those lured by too-good-to be-true returns and get-rich-quick schemes who are targeted by scammers. Many scams are based on proposals that sound legitimate and seem to come from trustworthy businesses.

What is going on?

While investing can be an effective and trusted way of growing your wealth, it has always provided opportunities for opportunistic criminals.

Experienced fraudsters can go to great lengths to present a legitimate looking proposal and use sophisticated techniques to trick people. Due to the longer-term nature of investing, it can be weeks and sometimes months or years before people realise they have fallen victim to a scam. There will be legitimate looking paperwork and reports. Criminals will even pay small false dividends over to make their victims believe their investment is growing, especially if it encourages further investment.

These techniques include cloning websites of genuine companies and creating documentation almost indistinguishable from the real thing. There can be what seem to be busy call centres, prestigious addresses and convincing sales people.

Everything seems above board, in fact, until such time as you try to get your money back.

How to spot an investment scam

There are several factors that should sound a scam alert:

They contact you. Scammers may need to make the first contact they might do this by email or social media. They may still contact you by post (although this can be a problem for them), or even in person. Is that friendly fellow in a suit really who he says he is?

Tight time pressure: Scammers might offer a bonus or discount if you invest before a set date. Or they might tell you the offer is only available for a short period. Their key technique is to ensure you don’t have time to think.

Promise of unrealistic returns: Fraudsters often promise tempting returns that sound too good to be true – because of course they are. Rates much better than available elsewhere, the ability to circumvent rules and regulations. If they were real, legitimate businesses would be able to offer them too.

Complicated offers: if an investment opportunity is too complicated, the chances are that it is deliberately planned that way to confuse you. The scammer tells you not to worry about the details, just concentrate on the profits your money will make. This means they don’t have to worry about the details either.

How to protect yourself from an investment scam

Fortunately, there are steps you can take to protect yourself and your money when you are planning investments. 

Check that the firm is authorised by the Financial Conduct Authority (FCA). You can do this by using the register on the FCA website.

Then check that it isn’t a cloned company.  The firm may be genuine – but the fraudster may be spoofing their connection with it. Make sure you use the contact details taken from the FCA’s register: Do not use the details given to you by the company, or by the person who contacted you,

But for real security, work with an investment adviser you can trust.

At Continuum we are independent advisers with full industry certification, and we protect our reputation by checking the credentials of the businesses we recommend for our clients. By calling us, you can be protected by our expertise.

Don’t run the risk of losing your money to a fraudster. Call us at Continuum.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice, you should seek independent financial advice before embarking on any course of action.

The value and returns of an investment are not guaranteed, investors may lose some or all of their investment. Capital is at risk.

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