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 occur 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.

Investment fraud 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 scammers will use a variety of techniques to try to take your money, and regularly target experienced investors. So how can you know if an investment is a scam? Fraudsters 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 fraud

  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 Watch 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 straightforward 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.

How to report investment fraud

If you believe you’ve fallen for a scam, it’s important to get help immediately. 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 the FCA's ScamSmart website. There is also general information on cybersecurity and staying safe online from us 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.

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