Be a ScamSmart investor: avoiding investment scams

What is investment fraud? 

Fraudsters’ pressure people into buying investments that promise high returns, but in reality are either worthless or non-existent. The most common type of investment scam is share fraud, but fraudsters may also offer investments in bonds, currency, commodities such as gold or diamonds, property developments overseas or even fine wine.

Investment fraud is often sophisticated and very difficult to spot. Fraudsters can be articulate and appear financially knowledgeable. They may have credible websites, testimonials and materials that can be hard to distinguish from the real thing. So it’s important you know how to spot the warning signs. 

Spot the warning signs

Investment fraudsters will use a variety of techniques to try to take your hard earned money, and regularly target experienced investors. 

They may do one or more of the following:

• Make contact unexpectedly about an investment opportunity. This can be a cold call, email, or follow up call after you receive a promotional brochure out of the blue.
• Apply pressure on you to invest in a time-limited offer, offer you a bonus or discount if you invest before a set date, or say that the opportunity is only available for a short period of time.
• Downplay the risks to your money, or use legal jargon to suggest the investment is very safe.
• Promise tempting returns that sound too good to be true, offering much better interest rates than those offered elsewhere.
• Call you repeatedly and stay on the phone a long time.
• Say that they are only making the offer available to you, or even ask you to not tell anyone else about the opportunity.

How to avoid investment and pension scams

1.Reject unsolicited investment offers

If you’re contacted out of the blue about an investment opportunity, chances are it’s a high risk investment or a scam. Scammers usually cold-call but contact can also come by email, post, word of mouth or at a seminar or exhibition. If you get cold-called, the safest thing to do is to hang up. If you get unexpected offers by email or text, it’s best to simply ignore them.

2.Check the FCA Register and Warning List

Before investing, check the FCA Register to see if the firm or individual you are dealing with is authorised and check the FCA Warning List of firms to avoid. 

The Financial Conduct Authority’s (FCA) Warning List is a list of firms and individuals that the FCA knows are operating without its authorisation. The tool also provides information about the risks associated with a particular investment opportunity. 

If you deal with an unauthorised firm then you will have no protection from the Financial Ombudsman Service or Financial Services Compensation Scheme if something goes wrong.

3. Get impartial advice

Always get independent advice before investing – don’t use an adviser from the firm that contacted you.

You can find financial advisers at unbiased.co.uk  and VouchedFor. If you’re looking for a stockbroker or wealth manager, you can try The Personal Investment Management & Financial Advice Association (PIMFA).

Remember, if an investment sounds too good to be true it probably is! For more information on investment fraud visit the FCA’s ScamSmart website.