Financial scams are more sophisticated than ever before, but a few telltale signs can give them away. Here are four ways to spot a financial scam and what to do if you think someone’s trying to scam you.

We’d like to think we wouldn’t fall for a financial scam, but the truth is we’re all vulnerable. Even amateur fraudsters can create convincing ads or replicate the websites, emails and phone calls of genuine financial businesses.

But no matter how sophisticated the attempt there are usually a few key signs that someone is trying to scam you.

1. You weren’t expecting to be contacted

A good indication of a financial scam is sudden, unexpected contact. It's very unlikely that a genuine business would contact you out of the blue with an investment opportunity, and if you’d lost your credit card then you’d probably already be aware.

Most fraudsters try to contact victims by phone or email and pose as a legitimate business, but you should also be wary of other forms of contact. That might be by post, someone stopping you on the high street, or someone knocking on your door.

Once contact is made, scammers often attempt to ingratiate themselves by asking about your circumstances, family and financial plans before using that information to empathise with you.

2. They offer you guaranteed returns

Another sign of financial fraud is a promise of guaranteed returns. Investment opportunities that offer high rewards with minimal risk are almost non-existent.

Scammers might use strong past performance (which could be real or fake) as evidence for their claims, but this is never a reliable indicator of future performance. Even leading investment experts can’t offer guaranteed returns.

If ‘get rich quick’ schemes were genuine, we’d all be millionaires. So, if an opportunity seems too good to be true it’s likely to be a scam.

3. The opportunity is vague or unusual

An unmissable, exclusive or poorly described opportunity is likely to be fraudulent. Scammers often bombard potential victims with jargon and headline figures without elaborating on the fundamental features of an investment.

For example, has someone offered an opportunity to invest in an emerging market but failed to describe the precise breakdown of the investment? Have they asked you to invest in an organisation that doesn’t show up in an online search?

4. They pressure you to make a quick decision

This is a key sign of a financial scam. Fraudsters want you to invest without thinking so they frequently use high-pressure sales tactics to force you into a quick decision. They're unlikely to provide their details for you to contact them after mulling over an opportunity, or they might offer to contact you after a very brief period.

Time-sensitive opportunities are likely to be fake. Scammers might claim that others have already benefitted from the offer and pressure you to invest before it ends. They may even offer you bonuses or one-time discounts if they think you might be wary of the opportunity.

What to do if you think you’ve spotted a scam

Scammers play on your emotions and try to get you to make quick, irrational decisions. If you think someone’s trying to scam you then stop, take a moment, and do the following things:

• Check that the person or company is legitimate. Search the Financial Services Register for the name of the individual or organisation offering you an opportunity. If you can’t find them then it’s probably wise to avoid the opportunity.
• Always be on guard. Be wary of unsolicited contact and never agree to investments or decisions in the heat of the moment.
• Talk to an expert before investing. Always speak to a financial expert that you trust before making investments. If a scammer claims to be someone you trust (such as your financial adviser), end the contact and get in touch with them using a method you’ve used in the past.

Get in touch with us if you’ve been offered an investment opportunity that you’re not sure about, if you think you’re being targeted by scammers, or if you think you’ve been the victim of a financial scam.

Contact the police if you think you’ve been the victim of a financial scam. You can also forward suspicious emails to report@phishing.gov.uk and forward suspicious text messages to 7726 for free.

For more information about financial scams visit www.actionfraud.police.uk. If you’re in England or Wales, you can also report fraud or cybercrime to Action Fraud on their website or by calling 0300 123 2040.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Written by Issy Minturn 27th August 2024

Approved by The Openwork Partnership on 15/08/2024