Investment scams are nothing new, but scammers are becoming more sophisticated than ever.

With the internet and easy movement of money, there are far greater opportunities for a fraudster to part you with your wealth.

In the first half of 2021 alone, financial trade body UK Finance estimates that more than £107 million was lost to investment scams, a 95% rise on losses in the first half of 2020.

When it comes to investment scams, it pays to take a critical eye to almost anything you’re approached with.

And while it is impossible to always be fully alert to these tricks, knowing what they might try is a good way to protect yourself from losing money.

Cold calling

Cold calling is perhaps the go-to for investment scams and is a well-trodden way to swindle money. In the vast majority of cases, if you get a call out of the blue from someone who wants to talk about investments, just hang up.

Indeed, pensions cold calling is now illegal, and has been for some time. Generally if you get a call like this where someone wants to discuss how your pension is invested, it’s a scammer. They are either operating illegally within the UK, or from abroad where the authorities have limited power to stop them.

Even when someone purporting to be from your bank calls to discuss the matter, it is generally advisable to politely end the call and try contacting the institution directly using their customer service line. Chances are it was a scammer who knows who you use for your banking or other financial products.

Cold calling isn’t the only way that scammers will try to contact you. Emails, text messages, letters and social media are all avenues for attack. But cold calling can be one of the most harmful as the fraudsters are often expert verbal manipulators. Take a deep breath and tell them no.

‘Trustworthy’ sponsors

This is a growing issue, especially as a range of mainstream media personalities and outlets are often engaged in combatting scammers, and then are themselves used to target victims.

Perhaps the most famous is Martin Lewis of MoneySavingExpert, who routinely reminds his followers on social media that often his image, or even fake commentary, is used to promote investment scams.

In another recent instance, consumer group Which? found its logo and name being used by scammers to try and push investment scams via email.

The scam involved victims being forwarded to a fraudulent website advertising fixed-rate bonds, something Which? says it would never do. The firm warns that the biggest giveaway in this instance is strange email addresses associated with the email message.

‘Guaranteed’ returns or ‘risk free’

Scammers will use all manner of promises to try and lure you into a fraudulent investment. One of the biggest red flags to watch for is the promise of “guaranteed returns” or “risk-free” investments.

Neither is ever possible when it comes to investment, as all investments carry some form of risk, and the return you can make is generally impossible to fully guarantee.

Look at the level of returns on offer if you aren’t sure. Savings rates are very low at the moment so anything offering high returns for your money is likely a scam.

And anyone promoting a legitimate investment will know not to try and tell you you’ll definitely get a high rate of return – hence why ‘risk warnings’ are so common with many marketing materials of investment firms.

Unusual investments

Another common red flag to watch for is unusual investments. Perhaps the most well-known example of this was the storage pod investment pension scam.

In 2017 the Serious Fraud Office (SFO) launched an investigation into two SIPP firms Capita Oak Pension and Henley Retirement Benefit for selling ‘storage pods’ to investors.

The SFO estimated losses around £120 million for those scammed into the scheme since 2011 – which essentially involved storage containers being purchased with investor money, which were then rented out.

Investors later found the returns were not as advertised and they couldn’t withdraw their money either.

Similar variations of this scam exist to sell other outlandish investments, including hotel rooms in the Caribbean or palm oil plantations in Asia.

Report the scam

This list is not exhaustive but is designed to give you an idea of how scammers might try to part you from your cash.

If you feel like you’ve been contacted by a scammer it is really important to report it. Not only to protect yourself, but to protect others who they might try and target.

  • Text messages should be forwarded to Action Fraud – using number 7726.
  • If you think you’ve fallen victim to a scam, in England, Wales or Northern Ireland, report it to Action Fraud online or by calling 0300 123 2040. In Scotland, report to Police Scotland by calling 101.
  • You can also report a phishing attempt using the Action Fraud site, or by forwarding an email you think is suspicious to report@phishing.gov.uk.

If you have any concerns or issues you’d like to discuss further relating to scams, don’t hesitate to get in touch with a financial adviser to discuss.