The sophisticated methods applied by the fraudsters means even business-savvy folk with a sound knowledge of how stockbrokers operate are being caught out. These statistics should serve as a warning for investors to approach new opportunities with caution.
How much can you lose?
According to Action Fraud, victims of investment fraud lost an average of £32,000 last year in swindles that included share sales, wine investments, foreign exchange and land overseas. One of the most common scams at the moment is the free pension review scam, with fraudsters seeking to capitalise on pension freedoms which give savers more flexibility on how to use their retirement pot.
How likely are you to get scammed?
A study by Citizen's Advice found nine out of ten people would fail to spot common warning signs of a pension scam, such as unusually high investment returns, cold calling and offers of free financial advice. The report titled 'Too Good To Be True', found 76% of people felt confident they could spot a fake, but of them only 12% succeeded in being able to tell which pensions offers were legitimate.
The free reviews and advice are designed to grab your interest, while leaving you in no doubt that they are the right people to help you. A recent YouGov survey by the Financial Conduct Authority (FCA) found that one in eight (14%) of over 55s who invested in financial products (such as stocks and shares) spent little or no time researching them before handing over the money.
Who's at risk?
Over 77% of victims reporting investment fraud are men with the average age of 65, but anyone thinking of investing should show due diligence.
Isn't it only the gullible who get scammed?
Investment fraudsters run sophisticated networks that look legitimate, from the professional websites and impressive brochures to the impeccable customer service and testimonials. Seasoned investors are also caught out, and the biggest individual loss recorded by the police is £6m.
Can they be stopped?
The authorities have been coming down hard on scammers, with multi-agency drives and police initiatives set up to combat boiler room fraud. Despite many arrests, last year over 3,000 reports of investment fraud were made to Action Fraud. Research by the FCA suggests that investment fraud often goes unreported, so the actual problem may be far greater.
Before you invest with an individual or firm always verify their credentials. Do not use the links provided by them. Check to see if they are authorised or registered by the Financial Conduct Authority (FCA) using the Financial Services Register. Firms and individuals can only conduct regulated financial services activities in the UK if they are authorised by the FCA or registered to do so, or are otherwise exempt.
To learn about the potential pitfalls in relation to an investment offer, check the FCA Warning List.
For more information on how to be a ScamSmart investor visit fca.org.uk/scamsmart.