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Increasingly sophisticated technology and the introduction of pension freedoms are leading to a rise in the number of financial scams.
Did you know an estimated £1.2bn is lost to investment scams each year, with share sales, wine investments, land banking and carbon credits commonly used by fraudsters to target potential investors?
Fraudsters target people of all backgrounds, ages and income levels, which means anyone reading this article could be a potential victim.
We spoke to the experts to find out what you should look out for and how you can protect yourself.
How to spot an investment scam
Scammers are always changing their tactics so the following are some of the red flags that could help you to spot an investment scam:
• Be vigilant - if a phone call or voicemail, email or text message asks you to make a payment, log in to an online account or offers you a deal, be extremely cautious. Financial institutions, banks and online retailers never email you for passwords or any other sensitive information by requesting that you click on a link and visit a website. If you get a call from someone who claims to be from your bank, don't give away any personal details.
• Scammers often use very convincing tactics to get you to sign up. Beware of anyone trying to pressurise you into making a decision.
• Scammers will make an investment sound very appealing and will often suggest that it’s less risky than it is.
• Offers made by scammers often sound too good to be true. For example, you might be offered better interest rates or returns than you’ve seen elsewhere.
• Scammers are persistent and will often try to form a relationship with you in an effort to build your trust. Beware of anyone who calls you repeatedly and/or anyone who tries to keep you on the phone for long periods of time.
• You might be told that you’re receiving a very special and/or limited offer.
• You might be told not to tell anyone about the offer you’ve been given. But talking with trusted friends and family about any investment offer you’ve been given could help you spot a scam.
• Fraudsters are known to target previous victims of investment fraud, claiming that they can recover lost money. You might be asked to pay an upfront fee but these companies will not get back your money.
• Some companies that run scams base themselves overseas in order to avoid regulatory requirements. Be cautious if a company that is based overseas contacts you with investment opportunities.
TOO GOOD TO BE TRUE
Some scammers try to entice people to put their money into exotic investments that are simply too good to be true. The investment ‘opportunity’ could be a hotel development in Cape Verde, a vineyard, jewels or a plot of land.
Sometimes the fraudsters are pretty convincing at impersonating a genuine investment company. They may even show you glossy brochures, certificates and professional looking websites.
The ‘broker’ will usually contact you out of the blue with what looks like an incredible opportunity, and try to pressure you into making a quick decision.
HOW TO PROTECT YOURSELF
There are a few simple things you can do to avoid getting duped:
1. Be suspicious of cold-calls or unsolicited texts or emails.
2. If you get cold-called by someone claiming to offer an incredible investment opportunity hang up the phone immediately. Don’t respond to text messages or emails from someone you don’t know.
3. Don’t deal with unregulated advisers.
4. Check the Financial Conduct Authority website to ensure the company is legitimate and regulated.
5. Be wary of overseas investments.
6. Make sure you’re 100% confident you’re being sold a genuine investment and that you fully understand the risks.
7. Watch out for schemes offering ‘guaranteed’ returns.
8. ‘Nothing, and I mean nothing, is guaranteed when it comes to investments,’ says AJ Bell’s Tom Selby. ‘The closest thing you’ll get are government bonds and final salary pensions – ironically the very things scammers often encourage people to leave. So if a company you’ve never heard of says it can deliver guaranteed returns of any amount, don’t touch them with a barge pole.’
9. Don’t rush to make a decision.
10. Make sure a pushy salesman doesn’t coerce you into doing something you might later regret. Read any documents carefully before you sign on the dotted line.
11. Report possible scams.
12. Contact Action Fraud by calling 0300 123 2040 or online at actionfraud.police.uk
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