A staggering £1.2 billion is lost each year to investment scams and, perhaps surprisingly, experienced investors are often targeted and are falling prey.
Worryingly, it is estimated that only about 10% of these scams are reported. It’s obviously very important to protect yourself against scams and there are certain steps you can take to ward off the fraudsters.
Don’t be seduced by extravagant claims
The old adage ‘if it looks too good to be true it probably is’ is a sound maxim to adhere to. Scammers will present their ‘investment opportunities’ in hyperbolic language designed to tempt you with promises of fast profits, big bucks or, usually, both.
Whether you’re collared on the telephone (see below) or they write to you with a professional looking glossy brochure or email you, don’t act impulsively; check any investment proposals very carefully.
Spot the scammer’s tactics
Beware of the following:
- Out of the blue contact via cold calling, email or possibly through the post and frequent follow up contact
- Applying pressure for you to commit by giving a short deadline for taking up their offer
- Saying you’ve been ‘especially chosen’ for the offer
- Extravagant claims to hook your interest
- Any suggestion that your risk is limited or even non-existent; for example, promising you’ll ‘own the asset anyway’ or quoting impenetrable legalese or marketing hype
A common investment offer is ‘share tips’ or similar – you may be asked to pay a fee each month for a ‘tipster’ service. It’s advisable to stick to known experts ideally with a lengthy track record to point to and a transparent online presence such as financial markets experts IG and avoid anyone who doesn’t boast such credentials.
If you have been contacted in this way – or wish to set yourself up to prevent scammers in the first place – adopt the following techniques:
Avoid or control cold calls
You can join the TPS (Telephone Preference Service) to prevent cold calls. Unfortunately, this may not stop all of them. Other call blocking methods are available; and don’t forget your mobile phone either as many scammers will choose to target this device to catch you on the go.
If you do get ‘caught’ on the phone and find yourself being pitched to the easiest thing is to hang up.
Check with the FCA (Financial Conduct Authority)
Firms and organisations providing investment opportunities should be regulated by the FCA, so if you’re suspicious check with their website. They can tell you if that company is on their ‘warning list’.
Seek independent advice
Your financial advisor should be independent to the company proposing the investment, and ideally, should be an IFA (Independent Financial Advisor) who themselves are regulated by the FCA.
Be on guard
Make it a rule to check and double check any investment opportunity presented to you. The basic ‘two step’ check of using the FCA site and checking with a financial advisor should be the two basic actions to take. Chasing a fast buck won’t be worthwhile if you’re caught out.