Four tips on how to avoid investment scams

Every year thousands of people fall victim to investment fraud. Here's how to spot the warning signs and the actions you can take to avoid it.

| 4 min read

Criminals use a wide range of methods to commit fraud and scams. Investment fraud occurs when 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, property developments overseas or even very niche areas such as wine.

Frauds can be sophisticated and very difficult to spot. Criminals are experts at impersonating people, organisations and even the police. They may spend hours researching their victim, hoping they will let their guard down for just a moment. They can also be articulate and appear financially knowledgeable. They may have credible websites, testimonials and materials that can be hard to distinguish from the real thing.

Spot the warning signs

Investment fraudsters will use a variety of techniques to try to take your 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. Think carefully and reject unsolicited investment offers
    Stop and think. If you’re contacted out of the blue about an investment opportunity, chances are it’s a high-risk investment or a scam. Reputable companies are unlikely to cold call! ​Contact can also come by email, post or even in person at seminar or event. 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. This is a list of firms and individuals that the FCA knows are operating without its authorisation.
    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 some independent advice before investing – even a chat with a trusted friend or family member could help. You can also refer to Take Five, which offers straight-forward and impartial advice to help everyone protect themselves from preventable financial fraud. Led by UK Finance, and backed by Her Majesty’s Government, it also has information on the latest common scams.
  4. Get help immediately if you may have fallen victim
    If you believe you’ve fallen for a scam, contact your bank without delay on a number you know to be correct, such as the one listed on your statement, their website or on the back of your debit or credit card. Then report it to Action Fraud.

There's more information on our ScamSmart page and on the FCA's ScamSmart website. There is also specific information on cybersecurity with Charles Stanley here.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Four tips on how to avoid investment scams

Read this next

How could higher inflation affect your investments?

See more Insights

Investment decisions in fund and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus.

More insights

Five investment trends defining the first half of 2024
By Rob Morgan
20 Jun 2024 | 12 min read
China’s central bank criticises Fed policy
By Charles Stanley
20 Jun 2024 | 16 min read
G7 backs Ukraine and tackles migration
By Charles Stanley
17 Jun 2024 | 6 min read
Wall Street continues record-beating run
By Garry White
Chief Investment Commentator
14 Jun 2024 | 12 min read