14th July 2017

Rathbones: Be a ScamSmart investor

In March, the Financial Conduct Authority (FCA) launched its ScamSmart campaign to help investors, particularly retirees, avoid the financial losses and emotional distress of being scammed. Over 65s with savings in excess of £10,000 are three and a half times more likely to fall victim to investment fraud. As responsible investors, we are naturally happy to support this campaign.

In 2016, victims of investment fraud lost on average £32,000 as fraudsters employed advanced psychological techniques to persuade victims to invest. If someone invests their money with an unauthorised firm then they will have no protection from the Financial Ombudsman Service or Financial Services Compensation Scheme if things go wrong.

Most of us think that scams happen to other people and, if we’re honest, we tend to believe that those who fall for them must be particularly credulous. But many victims are educated people with investment experience – perversely, it is this that makes them susceptible to fraud. Scams are often operated from the UK and may involve investments in wine, precious stones or carbon.

The FCA urges over 55s to check that investment opportunities are genuine before they part with their money. Fraudsters are targeting this growing segment of the population because they are more likely to have money to invest. They typically target experienced investors: low interest rates are a key factor in successful frauds as investors seek higher returns. The initial contact is likely to be a cold call, but fraudsters often pretend that they’re not calling out of the blue. They may, for example, refer to a brochure or an email that they have sent you andmay do one or more of the following:

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, 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.

Interestingly, those surveyed were more aware of certain signs of investment fraud, but less aware of others. For example, 92% agreed being contacted out of the blue could be a warning sign, but 19% were unaware that being promised returns above the market rate could also be a tactic. 

How to be a ScamSmart investor:

Reject any unsolicited contact about investment opportunities.

Check the FCA Warning List and the Financial Services Register

Get independent financial advice

At Rathbones, we experience our fair share of attempted scams. Our belief is that you can never be too careful.

Find out more at fca.org.uk/ScamSmart

Please visit rathbones.com for our latest views.

Investment Commentary, Investments, Partner Lead Story