7 Ways To Protect Yourself From Investment Scams

It is that time of year when scams are rife. In the last few weeks, three First Wealth team members alone have received the same threatening phone call from HMRC impersonators, demanding payment for alleged tax fraud (for the record, they’re all completely innocent!). They rely on the statistic that a sizeable number of people will be filing tax returns close to the January 31st deadline, and may owe tax.

By nature, society has grown sceptical of calls from HMRC, especially knowing that they would never call unless they have already written to you. You can also login securely to your government gateway account and check for any outstanding amounts. Other popular scams can usually be detected, such as receiving correspondence from banks we have never used, being contacted by a stranger to help with an advance fee in return for a large amount of money or being told we have been randomly selected for a huge cash prize. Unfortunately, fraudsters have become more deceitful and their scams more intelligent, making it harder to distinguish between genuine and forgery.

In our profession specifically, we have seen an uplift in unregulated investment offerings and scammers that claim to have qualifications or authorisation to advise, who categorically do not.

We put together the following checklist on the common ways you can protect yourself against investment scams:

1) Never trust unexpected inbound points of contact.

Whether they come in the form of a phone call, email, or text. Be sure to check the authenticity of anyone who contacts you regarding any personal data, especially financial.

2) If something seems too good to be true, it usually is.

If you are being promised high returns for low input, fantastic odds on risky investments, or anything else that sounds like a get rich quick pitch, it is likely to be a scammer.

3) Understand DIY investing or consult an expert before parting with your money.

Social media is full of people claiming to have made endless money from ‘investing’ recently, but this is often not the case. Though you can be lucky with predicting the market in the short term, evidence shows this is not a successful long-term strategy. Read our evidence-based investing guide for more details.

4) Never use a phone number to identify if a call is from a genuine source.

It is extremely easy to modify phone numbers that appear on your phone. Scammers use this spoofing method to appear as though they are calling from a legitimate company.

5 – Do some desk research.

Your first point of call before trusting any company or individual is to do some research. A simple search on Google can show if a company has a website; if it is registered on the company’s house; if the registered address and telephone number is where you are receiving correspondence from, if there have been any adverse reviews and other helpful information. This simple sense check can eliminate any obvious red flags and give you an insight into the relationship you are entering.

6 – Check the FCA register to ensure both the company and the individual is authorised to advise on the investment.

This is the most important check you can do when trusting others with your hard-earned cash. Financial services is a highly regulated profession for good reason, so make sure you are working with individuals and companies who are registered and authorised to do this type of business. Without this, you may not be covered by the Financial Services Compensation Scheme (FSCS). You can also check this list for firms that have been reported for unauthorised activity.

7 – Speak to your adviser.

If you are considering any investment outside of your financial plan, consult your adviser. They are there to help you make sound decisions and ensure you make the best decisions for both now and in the future. At First Wealth, we encourage our clients to pick up the phone and talk to us. We do this every day, and we pride ourselves on the knowledge and experts we have in-house. Ultimately, the final decision will lie with you, but it is our job to make you aware of all your options and the risks associated with each.

Have you been a victim of a scammer in the past?

The crime survey in England and Wales estimates there were 3.8 million incidents of fraud last year. In 2019 over eleven thousand retail investors lost £236 million pounds in the collapse of London Capital & Finance. It is a distressing notion to realise you have become a victim of a scam, but it is not something to be embarrassed about. It is becoming ever more difficult to spot scams and there will always be opportunists looking for a quick payday. Following the above steps before embarking on any financial decisions will ensure that you are protected by the governance and safety nets put in place by the FCA. 

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.