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.

1.   Beware unexpected offers

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.

2.   Look out for warning signs

There are several red flags indicating that you might be dealing with a scam and should be on your guard. These include:

• Tight deadlines - scammers try to get you to act fast by telling you that the opportunity is only available for a certain amount of time and that you need to hurry. This classic tactic is often effective at pressuring people into signing up. Look out for phrases such as “once-in-a-lifetime”, for example.
• Reviews - usually good reviews are a reason to trust a company and scammers know this. They might share fake reviews with you with success stories from fake clients.
• Unrealistic returns - if the returns sound too good to be true, usually they are. But at other times, scammers might offer more realistic returns to make themselves seem more credible, so don’t use this as the only factor when making a decision.
• Claims of exclusivity - scammers may suggest that this offer is only available to you. They might even ask you not to tell anyone else about the investment opportunity. This is to further pressure you into agreeing to invest.
• Pestering - if they call you repeatedly, even after you’ve said no, they are very likely a scam. And once they have you on the phone, they’ll do their best to keep you there for as long as possible.
• No option to call back - they won’t want to share any contact details so asking if you can call them back is a great way to discover if they’re legitimate or not. And if they do give you contact details, be cautious if it’s just a mobile phone number or a PO Box address.
• Email errors - if contacted about an investment via email, check the way they address you. Have they spelt your name or title correctly? And what about the sender address? Often scammers will have misspelt or random email addresses.

4.   Get advice before an investments

Never rush into an investment because you feel pressured. Seek advice from an Independent Financial Advisor.

5.   Watch out for repeat scams

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.

6.   Keep your information safe

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.

7.   Report scammers

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.