Investment scams and scammers.

As I'm sure you must be all too aware, investment scams have been on the rise in recent years. 

With the current cost of living crisis increasing the demand on household budgets, together, they have formed ideal conditions for scammers to create the fertile breeding ground enticing potential investors into the mistaken belief that what they are offering isn`t too good to be true.

To try and help you avoid these financial pitfalls what follows is designed to highlight what to look for and what you could do if your suspicions have been raised. 

A trigger to look out for is the offer of guaranteed returns. In the investment world, it is far from common to come across any investment offering the promise of high or guaranteed returns for little or no risk. It is usually the other way around, in that low-risk investments normally offer relatively lower returns.

If guaranteed higher returns were available, it would be strange if everyone wasn`t wanting to invest in them. Hence, if it seems too good to be true, it normally is too good to be true.

Something else commonly used by scammers is the pressure they apply to you to make a quick decision. They won`t accept an ‘I`m unsure’ type response. They will persevere with you in their quest to get you to invest.

They are unlikely to accept your request to get back to them after you`ve had the chance to think it over, preferring to arrange to call you back later. Indeed, they may say that there is only a limited window of opportunity to enjoy the benefits which other investors have already enjoyed.

In this they rely on individuals seemingly being more prepared to take more of a risk if they make an instant decision than if they take the time to think about it. And for those still showing a reluctance to invest, they may offer additional incentives to act now.

If the investment opportunity appears to offer unusual benefits, then this is probably when you should be most sceptical about it.

It may be that these unusual benefits are opaque or unclear, dressed up or over-hyped and are focused on headline returns, with little or no details covering how the investment is structured, or works in practice.

If you seek more detailed information on the investment, scammers will often provide links and/or material which simply doesn`t provide the information you are asking for.    

Reputable Investment businesses rarely, if ever, call members of the public to try and persuade them to invest. Accordingly, if you ever get called this way then this alone should be enough to ring the warning bells.

Today, the most common means of communication employed by scammers is by phone or by some form of electronic device. That said, scammers are still known to employ person to person methods, by approaching you in shopping centres and even by going from door to door.

However they manage to talk to you, scammers are, in the first instance, likely to try and get on the right side of you by asking you personal questions quite unrelated to investment matters, or by paying you compliments, which might seem strange coming from someone you`ve never met before. The questions then slip seamlessly into financial related ones, which in turn connect with the investment which they wish you to make.  

Obviously, if the investment has generated your interest you need to make sure that everything is above board and strictly legal.

A sure-fire way of doing this is to check with what is called the Financial Conduct Authority (FCA) and their Register to see whether the investment firm is listed on it. If it isn`t, then you would be advised to steer well clear of the firm. 

That said, even if it is, you may well be advised not to deal with any firm which approaches you directly, without any explanation as to how they have your contact details. Indeed, if they do attempt to engage you in conversation, simply call a halt to it by putting the phone down on them, or just do not reply to their electronic communication. Such actions will eventually foil even the most determined scammer.

Even if the investment opportunity passes all these tests, it might be a sensible course of action to discuss the opportunity with a trusted and appropriately qualified investment professional.

Furthermore, if you have some capital available to invest, or say. a pension fund which you are unsure as to whether it is still in the right place, why even run the risk of being caught by a scammer? That is when you could eliminate the risk by discussing the issues raised here, or if you have any concerns, contact your usual independent financial adviser at Dentons Wealth.