Be a ScamSmart investor

At the beginning of the year, the Financial Conduct Authority (FCA) launched its ScamSmart campaign to help investors, particularly retirees, avoid the financial losses and emotional distress of being scammed. Over 65s with savings in excess of £10,000 are three and a half times more likely to fall victim to investment fraud.

As responsible investors, we are naturally happy to support this campaign, but it has particular appeal to us given many of our clients are in this age group.

In 2016, victims of investment fraud lost on average £32,000 as fraudsters employed advanced psychological techniques to persuade victims to invest. If someone invests their money with an unauthorised firm then they will have no protection from the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong.

Most of us think that scams happen to other people and, if we’re honest, we tend to believe that those who fall for them must be particularly credulous. That may be true of the “send me £25,000 to release your £3 million inheritance” emails from officials at fictitious Nigerian banks. But most scams are far cleverer than this: they are deliberately designed to exploit our belief that we could never fall for such tricks.

Many victims are educated people with investment experience – perversely, it is this that makes them susceptible to fraud. Scams are often operated from the UK and may involve investments in wine, precious stones or carbon. In addition, the person making the call may not realise that they are involved in a scam – they may believe they are working for a legitimate company, making them even more persuasive.

The FCA urges over 55s to check that investment opportunities are genuine before they part with their money. Fraudsters are targeting this growing segment of the population because they are more likely to have money to invest. They typically target experienced investors: low interest rates are a key factor in successful frauds as investors seek higher returns. The initial contact is likely to be a cold call, but fraudsters often pretend that they’re not calling out of the blue. They may, for example, refer to a brochure or an email that they have sent you.

That’s why it’s important you know the other tell-tale signs that suggest the investment opportunity is likely to be very risky or a scam. They may do one or more of the following:

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, 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.

Interestingly, those surveyed were more aware of certain signs of investment fraud, but less aware of others. For example, 92% agreed being contacted out of the blue could be a warning sign, but 19% were unaware that being promised returns above the market rate could also be a tactic. 

Mark Steward, Director of Enforcement at the FCA, advises: “Be alert to the warning signs like being contacted out of the blue, promises of low risk and/or guaranteed above market returns, special deals just for you, time pressure and, very often, flattery.

Be vigilant. Don’t let them push you into making a decision and parting with your money. Question their claims. Check the FCA Register and seek impartial advice. If in any doubt – don’t invest.”

How to be a ScamSmart investor:

Reject any unsolicited contact about investment opportunities.

Check the FCA Warning List.

Do your own checks before investing; check the FCA Warning List and the Financial Services Register to see if those that are asking for your money are the real deal. The Warning List is a list of firms and individuals who are operating without FCA authorisation.

Get impartial advice.

Before you hand over any money, get independent financial advice from someone unconnected to the firm that has approached you, such as an IFA, solicitor or accountant.

At Rathbones, we experience our fair share of attempted scams. Our belief is that you can never be too careful.

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