Occasionally as practitioners, we hear stories that bring the impact of criminal activity or malpractice home to us.
I heard such a case recently. An adviser colleague received a call from a family friend, who had learnt that her elderly father had been the victim of a financial scam. It transpired that over a period of twelve months the gentleman had invested in schemes that promised healthy returns through investments in foreign exchange. This had started with small amounts of £250, and then £1,200. These, it appeared, had done well and statements were sent to the “client” showing a positive return. After investing a further £80,000, time passed and at the end of 2018 he contacted the firm to withdraw his funds. Instead he was persuaded that a further investment was needed to avoid missing out on a golden opportunity. Over time this man had placed £180,000 of his life savings with a firm that had gained his trust. If such losses were not bad enough, for some who have fallen victim to this scam, salt is being rubbed into their wounds by rogue agencies who claim to help victims recover their losses – for an upfront fee.
We all make bad decisions from time to time, but we should not underestimate the psychological impact that such an experience can have on a client, particularly the elderly; the feeling of being duped and the humiliation that comes from that, aside from the financial impact.
Anyone with concerns about a scheme should look to the Scamsmart section of The Financial Conduct Authority’s website. The variety and sheer number of schemes is eyewatering. Fraudsters succeed by finding a technique that works and replicating it time and again. So, what are the warning signs to look out for?
- Unexpected contact– privacy rules now prevent cold-calls, so legitimate firms will not contact you in this way.
- Time pressure– a bonus or discount may be offered if you act quickly.
- Social proof– fake reviews or tales of others investing may be used.
- Unrealistic returns– attractive returns, better than others available in conventional savings and investments may be offered.
- False authority– convincing websites and literature, claims of regulatory status and an authoritative manner may all be employed.
- Flattery– a personable style and a friendly manner are used to dull our natural defences.
The body of resources provided by the FCA and others to help steer consumers away from the risk of investment and pension scams reflects the size of this problem. However, this year another form of financial scam has grown exponentially.
Traditionally, scams have been seen as something to which the elderly and vulnerable in particular fall victim. However, a recent report on BBC Radio 4’s “You and Yours” looked at the increasing trend of younger people investing in fake investment schemes. Fraudsters have been using adverts or directly approaching people on social media sites such as Instagram and Snapchat. Often they appear to have large numbers of followers, with glowing reviews from satisfied customers. Returns of as much as 400% in a short period are promised. Rarely is any detail of what would be invested in mentioned. A spokesperson from Monzo, the online banking provider, said that in June this year the average age of victims was just 19.
Whether your circumstances are that you are seeking to make the most of a lifetime’s saving or make a monthly pay cheque stretch further, the adage that if something seems too good to be true it probably is, is surely one to be borne in mind.
If you would like to discuss the areas outlined in this note in greater detail, please contact your usual Partners Wealth Management adviser, or call us on 020 7444 4030 for an initial conversation.
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