It’s not just inexperienced investors who get scammed. Even the financially savvy get tricked from time to time. Scammers are becoming increasingly skilled at conning people while digital technology makes scams even harder to spot.
Investment scams are any fake schemes that get people to hand over money in return for the chance to make a profit. Sometimes this investment doesn’t exist at all. On other occasions, the investment opportunity does exist but the scammer takes your money instead of investing it.
Scammers often appear to be very financially knowledgeable, speaking authoritatively on their investment products, and also have credible-looking websites that make them appear legitimate, featuring testimonials and professional documents.
The most common investment scam is a Ponzi or pyramid scheme where money from new investors is used to pay former investors. Other types of scams include investments in unregulated products like gold or diamonds that aren’t covered by rules or investing in overseas properties that don’t exist.
These kinds of scams are on the rise. Between September 2019 and September 2020, Action Fraud received around 17,000 reports of investment fraud – a 28% increase compared to the previous year.
This is due to a few reasons—most notably, the introduction of pension freedoms in April 2015. This gave people easier access to money from their pension pots, which, in turn, made them more vulnerable to investment scams.
The pandemic has also coincided with an increase in investment scams, with scammers preying on people who are struggling financially due to COVID-19.
Here’s how to avoid being the victim of an investment scam.
If you’re contacted randomly, out of the blue, chances are it’s a scam. Scammers often cold-call or send unsolicited emails or letters.
If you get cold-called by a scammer, just hang up. And ignore any unexpected contact from any investment firms in the form of door-to-door visits, emails, letters, or brochures.
There are several red flags indicating that you might be dealing with a scam and should be on your guard. These include:
Never rush into an investment because you feel pressured. Seek advice from an Independent Financial Advisor.
If you’ve fallen for a scam once, you’re more vulnerable to being targeted again. Scammers might share your details with other criminals who might claim they can help you get your money back from the last scam.
Use strong passwords and different ones for different accounts. Keep evidence of online purchases and an eye on your bank account. Don’t give out your personal information over the phone or to strangers and don’t click on suspicious-looking email links.
If you think you’ve been targeted by scammers, report it Action Fraud on 0300 123 2040.
If you’ve already given your financial details to scammers, tell your bank or pension provider immediately. They may be able to stop the transfer before it happens.