Is it an investment scam? The telltale signs you're a target

Published by Michael Trudeau on 21 October 2014.
Last updated on 21 October 2014

Money and handcuffs

According to the FCA, the most vulnerable people are those in retirement who are actively looking for an investment opportunity.

Designed to look like genuine investment firms, scammers might use websites mimicking legitimate firms, slick brochures and faked official-looking documents to convince someone to part with their savings, and then sometimes even to reassure them that their investments are doing well.

A police contact also told Money Observer that scammers sometimes use fake names to give them an air of sophistication and privilege.

How can you spot a scam?

Some key signs that an investment might be a scam in disguise include:

  • Initial contact by cold call or follow-up call after receiving an unsolicited brochure;
  • Pressure to invest in a limited-time offer, perhaps where a bonus or discount is promised if you invest before a set date;
  • Suggestion that the offer is only available to a limited group of people;
  • Downplaying of the risks involved, for example the claim that you can sell your assets yourself if the investment doesn't work;
  • Legal jargon to suggest the investment is very safe;
  • Returns which sound too good to be true, for example better interest rates than offered elsewhere; and...
  • Repeated calls and keeping you on the line for a long time.
  • Martin Wheatley, chief executive of the FCA, says: "Those operating investment scams use very sophisticated techniques to build trust and dupe even experienced investors out of their savings. With large numbers of people at risk, it's important to know how to spot the signs of a potential scam.

"We would caution against anyone taking a risk on a firm or individual who isn't authorised by the FCA. Our message is simple, don't accept a cold call."

Money Observer has spoken to several people who feel they've been ripped off by a scam that did not start by a cold call but was spread by word of mouth.

The average victim loses £20,000 and the FCA receives an average of 5,000 calls annually from investors worried about a suspected fraud.

A warning list of dodgy firms and other tips can be found on the FCA's new Scamsmart webpage.

This article was written for our sister website Money Observer

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