Many consider Sir David Attenborough to be a national treasure, loved for his engaging nature documentaries. Unfortunately, criminals exploited his popularity when they used his likeness to promote an investment scam.
According to NatWest, an image of Attenborough appeared on a social media advert, claiming that he earned £125,000 every month from his investments. Unsuspecting members of the public were invited to invest their own wealth in the same products, and victims collectively lost £275,000 in the process.
These kinds of celebrity investment scams are becoming more common, especially as new technology makes it easier to create convincing video and audio depictions of famous figures. Yet, this is only one of the techniques that scammers use to convince you to invest in their fraudulent schemes.
That’s why the Met Police recently published its Little Book of Investment Scams to warn about some of the most up-to-date techniques that criminals use to prey on unsuspecting investors.
Read on to learn about three common investment scams the police are warning you to watch out for.
1. Pension scams
You likely want to maximise the savings in your pension, so you can achieve your desired lifestyle when you retire. In some cases, moving your savings into a new scheme with different fund options or lower fees might help you achieve this. However, it’s important that you’re aware of the potential for pension scams when transferring your savings.
Criminals may contact you out of the blue or advertise on social media, offering significant investment returns on your pension savings. They might also give incentives such as cash payments if you move your pot.
Yet, the pension scheme may be fraudulent, and you could lose everything. Even if the pension scheme is real, it might not deliver the promised returns and may not be suitable for your unique financial goals.
According to Action Fraud, UK consumers collectively lost £17.7 million to pension fraud in 2023, with an average loss of £46,959 per person.
That’s why it’s crucial to ignore any unsolicited contact and always seek professional advice before moving your pension savings to another scheme. This could prevent you from falling victim to a scam and ensure that a pension transfer aligns with your personal financial goals.
2. Ponzi schemes
Ponzi schemes are an older type of investment scam, but they’re still as prevalent as ever. They are named after Charles Ponzi who, in the 1920s, promised investors a 50% return on an investment in international mail coupons.
In reality, there was no investment and Ponzi used wealth from the second wave of investors to pay fake “returns” to the first wave. Then, the third wave of investors paid the second wave, and so on.
Scammers still use this same basic model today. They’ll typically contact you on the phone, through email, or using social media ads enticing you with an exciting new investment opportunity.
Naturally, they’ll promise market-beating returns and a low level of risk. Often, they will tell you that you only have a limited time to invest, and they can’t fully explain the nature of the investment because “it’s too complicated”.
The early adopters believe the scheme is legitimate because they’re seeing returns, paid for by new investors. Once enrolled in the scheme, scammers will often encourage you to recruit your friends and family. When they have enough victims, they’ll disappear with your hard-earned savings.
Fortunately, there are some tell-tale signs of a Ponzi scheme to watch out for, including:
- A risk-versus-reward promise that seems too good to be true
- Pressure to invest quickly or risk missing the opportunity
- Being encouraged to recruit friends and family members
- Difficulty cashing out your investment.
Generally, try to ignore unsolicited contact and avoid investing in products advertised on social media. Additionally, you may want to be cautious about investing in anything that you don’t fully understand.
Instead, you may benefit from working with a professional financial planner. We can do due diligence on investments and create a portfolio that aligns with your attitude to risk and long-term goals.
3. Overseas crop scams
Overseas crop scams may not be as well-known as other types of investment scams, but they are becoming more common.
Fraudsters may offer the chance to buy a plot of land overseas, normally on a farm or plantation of some kind. The idea is that you own a portion of the land and receive some of the profits from whatever crops the farmers grow there.
Scammers might promote this as an alternative investment that offers better returns than the stock market. Normally, the advertised investment period is around five years, after which the crops are harvested and sold, and you receive your share.
However, the plot of land likely doesn’t exist at all. Once they have your investment, the scammers may cut contact immediately or they might try to convince you to invest more before disappearing.
To reduce your chances of falling victim to these kinds of scams, avoid making decisions based on unsolicited contact of any kind. Additionally, remember that the Financial Conduct Authority (FCA) doesn’t regulate the sale of land, trees, or crops, so you don’t have any consumer protection.
It may be beneficial to stick with more traditional, regulated investments so you can easily check whether they are legitimate.
These are just three of the investment scams that the authorities want to warn the public about. The Little Book of Investment Scams, published by the Met Police has more information about how you can protect yourself.
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We can help you create an investment portfolio aligned with your attitude to risk and financial goals.
Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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