7 steps to take to reduce the risk of investment fraud


When you’re investing your money, you should carefully think of the investment risks involved. However, considering how attractive your investment portfolio will be to fraudsters is just as important.

Figures obtained from the National Fraud Intelligence Bureau by AJ Bell suggests that investment fraud is on the rise. It’s a crime that could mean victims’ financial security and future is placed at risk. In the first six months of 2019, over 8,000 investment fraud reports were made, almost double the amount in the same period last year. The rapid surge means investment fraud is set to reach a record high this year.

If you were to lose a portion or all of your investments, how would it impact your future? It may mean your retirement is less comfortable or you’re unable to offer a helping hand to loved ones.

Tom Selby, Senior Analyst at AJ Bell, commented: “Financial fraud in the UK is mutating, with the number of victims of older-style ‘pension-liberation’ scams dropping in recent years on the back of a series of Government interventions – including the ban on cold-calling – and a significant industry-wide public awareness campaign.

“However, as pensions-based scam reports have fallen, the number of people falling prey to scams focused on their investments has continued to rise and look set to hit record highs in 2019.”

A ban on cold calling relating to pensions came in at the beginning of the year but this hasn’t been extended to all areas of financial services and there are still loopholes. The growing number of investment fraud reports has led to calls for the ban to be extended.

Are you at risk of investment scams?

Many of us think we’d spot fraud attempts. However, criminals can use sophisticated tactics and strategies, as well as appearing professional. It may be easier than you think to unwittingly hand over your money or personal details.

The latest research from the Financial Conduct Authority (FCA), for example, indicates that 42% of pension savers, the equivalent of over five million people, in the UK could fall for common tactics used by scammers. Even those who considered themselves to be financially savvy were just as likely to be persuaded to part with their money.

So, what can you do to minimise the risk of your investments falling prey to scammers?

1. Be cautious of opportunities that are out of the blue

Investment decisions can change your financial security over the long term and, as a result, should be carefully considered. Opportunities that come from out of the blue might be a good choice, but you should be cautious. This is particularly true for cold calls or advertisements, including those on social media. You don’t have to immediately discount opportunities, though keep in mind that doing research and assessing how it’ll impact your financial plans is crucial.

2. Check the FCA register

If you’re speaking to someone about investments, make sure they’re regulated. You can do this by searching the FCA register. Some scammers will use legitimate details of financial service providers to lull you into a false sense of security. Even if the firm or individual appears on the register, use the details listed to contact them directly and ensure the communication is genuine.

3. Don’t be pressured into making quick decisions

Investments should be undertaken with a long-term view and not as a snap decision. Genuine financial professionals will understand this and give you the time needed to consider their proposition and ask questions. Fraudsters, on the other hand, will want to close a deal quickly. If you feel like you’re being pressured or are having time limits imposed, take a step back.

4. Take the time to understand the investments

Exotic investments can sound intriguing but if you don’t understand what you’re investing in, you need to at least take some time to do some research. It’s important you understand your financial decisions, including how your money is invested and how it would fit into your existing portfolio. If you’re unsure, speak to your financial adviser.

5. Remember investment returns can’t be guaranteed

In a bid to entice investors, some scammers will claim investment returns are guaranteed. As much as we’d like this to be true, it simply isn’t. All investments carry some risk, the level of which should be a critical part of your decision. If the person you’re speaking to is unwilling to discuss the risks or gives vague answers, ask yourself why that is.

6. Be cautious of ‘free advice’

Scammers have been using terms such as ‘free pension review’ and ‘free advice’ to start an initial conversation; advice is never free. A genuine finance professional should be upfront about their fees and associated costs of the investment opportunities they’re proposing. This allows you to make a decision that’s right for you and your circumstances.

7. Be realistic

We all want to get the most out of our investments. It’s natural to be drawn to investment opportunities that claim to offer higher returns but here the old adage ‘if it seems too good to be true, it probably is’ applies. Be realistic about the investment returns you can expect with your risk profile in mind.

There are orgnaistions and departments that can provide you with support if you’ve been affected by a scam or are worried you’ve been targeted. These include:

You can also get in touch with us if you have any questions about your pension or investment portfolio.