6 easy ways to spot (and avoid!) a financial scam

Posted on January 22nd, 2014 | Categories - Investments

Scam Computer Keys Showing Swindles And FraudOver the past year or so, we’ve heard from a growing number of investors who have found themselves victim to a financial scam, often resulting in a large hole in their finances.

Indeed, our Marketing Manager, Phillip Bray, has been directly targeted and offered inappropriate and high risk investments after only the briefest telephone conversation.

So how do you avoid being scammed?

Do you need financial advice? Our advisers can help

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What are the signs to look out for?

Here’s six easy ways to spot and avoid a scam.

1. “If it sounds too good to be true then it probably is”

Sounds obvious doesn’t it? But if you only remember one thing from reading this article, then make it this.

Look out in particular for promises of unrealistic investment returns and the suggestion that an investment is guaranteed; both are a potential sign of a scam, or at the very least a risky investment.

2. Don’t reply to text messages

“If you have over £15k in your pension it has lost £000’s in the past few years. To get this back and find out your pay out text Review back.”

This text was sent to one of our staff last week and you’ve probably had similar sent to you. This type of marketing would never be used by a reputable firm of financial advisers.

The simple answer is never reply, if you need financial advice or are worried about your pension, there are far better ways to find a financial adviser.

3. Never do business with someone who cold calls you

The same applies to texts as cold calling, whether it is on the phone or at your door.

We would urge you never to make an investment decision based on what you are told in a cold call. Many financial scams start with an unsolicited sales call, often promising something which “sounds too good to be true.”

Be polite, put the phone or close the door and then register with the Telephone Preference Service.

4. Is your adviser regulated? Check them out!

All financial advisers in the UK have to be authorised by the Financial Conduct Authority (FCA).

Before taking financial advice you should check that the person you are dealing with is indeed authorised to be giving you advice. It’s easy, simply visit the FCA register, which you can do by clicking here and input their details.

If the person you are dealing with doesn’t appear on the register, walk way, it’s that simple.

There are plenty of other ways to check out people you are thinking of doing business with:

  • A quick Google search can unearth interesting information
  • A Companies House search is cheap and easy to perform
  • Search the FCA’s prohibited persons list
  • Try find an adviser through a recommendation, whilst this isn’t fool proof it’s a good place to start
  • Ask to see a copy of your adviser’s Statement of Professional Standing, this will confirm that they are up to date in their training and development

5. Avoid pension ‘liberators’

‘Liberation’ is a positive word isn’t it? Usually, but not when it’s linked to a pension.

Unless you are terminally ill, you cannot take any money out of your pension before you are 55, without a huge tax penalty.

But, there are companies out there, often known as ‘pension liberators’, who will try and tell you different. They are wrong. The rules are the rules and if you do manage to get money out of your pension before you hit 55, HMRC will have you on their radar and you’ll be hit with a tax bill of at least 55% and potentially rising to 70%.

Anyone who tells you they have worked out a way around this tax charge is wrong. Again the advice is simple, walk away and take financial advice from a regulated individual.

6. Unregulated investments

Unregulated investments are those which, as the name suggests, are not regulated by the Financial Conduct Authority (FCA) and therefore represent a far greater risk.

Examples might include, property, both in the UK and overseas, woodland, hotel rooms, car parks and so on.

They can be sold by unregulated advisers, which means that if the promised returns fail to materialise, or worse your money is lost, you have nowhere to turn.

Simply put, be extremely careful of unregulated investments.

Are you worried? Give us a call

If you are worried about your finances, or think you need financial advice, our team are here to help you.

Our team of Independent Financial Advisers, who are regulated by the Financial Conduct Authority, are experienced in advising both savers and investors on their options.

If you would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email info@investmentsense.co.uk