Article by Phil
IFA Magazine recently published a helpful article looking at the most common investment advice scams currently doing the rounds.
With investment scam costing almost £900 million last year it’s a big business and you need to be aware of what to look out for.
Crypto scams
Crypto still remains the #1 scam zone. If you are buying crypto, please take your time and be extra vigilant. One of the big problems is that crypto is still unregulated. That means no one is checking who these crypto firm are. They can disappear with your money just as quickly as they spring up. Some of the things to look out for:
- Are they offering returns on your investment that are too good to be true?
- Check their registered address – does it exist? Google it, is it a real building and is it what you’d expect for an investment company?
- Watch out for fake dashboard in your online account which show the value of your investments – is it real?
- In particular find out how you can withdraw your money and profits. Are there any charges attached; can you get your money out?
- Also watch out if you were approached to “invest” through a contact online i.e. on Facebook or X etc.
- Be very careful if you are asked to download any software in order to make your online account work – chances are they will be hacking your computer or phone.
Fake investment advice firms
This is one to look out for. It’s an impersonation scam. The scammer is pretending to be a legitimate business, possibly a well-known firm. Things to look out for include:
- Being pressured to “act now” to avoid missing out on a special deal. This is a big warning sign.
- Check the web address. Is it correct or is there a tiny mis spelling that makes it look like another company.
- Check the FCA register. Is the company registered. Is the address the same. Is the telephone number correct.
- Has the company contacted by phone or via a social media platform. A real investment advice firm would not do this.
- Check out verified online reviews – do they look genuine.
Pension scams
Pension scams are rife. But thank fully there are more checks involved with pension transfers, so it is more difficult for the scammer because the pension provider is involved in checking as well. Things to look out for include:
- Being pressured to “act now” or being offered a rate of return that is too good to be true. This is likely to mean that the investment is an unregulated scheme. That puts your money at risk.
- Offers to cash in your pension before you are 55. You can’t do that. If you are offered this option, it’s a scam, pure and simple.
Pension Transfer risks
Although not scams. Peoples Pension are concerned that people are losing out by transferring their pensions to schemes with higher charges or worse performance than their existing schemes. They estimate this could cost people up to £1.5 billion a year. Their advice is always to get professional pension and investment advice before making a pension transfer. Especially given that over 50% of people don’t know how a transfer works.
On the plus side, Standard Life estimate that 30% of people are making additional contributions to their workplace pensions. A further 10% have actually made lump sum contributions. Any top up is likely to add value to your final retirement pot.
Investment advice confidence
It’s important that people can feel confident about taking investment advice. Avoiding scams and reducing the amounts lost would be a good start. Hargreaves Lansdown estimate that almost 9 million people in the UK are in a position to make investments. However, 4 million of those don’t bother making any investments.
One of the reasons is a lack of confident and trust in the investment advice market.
A Scottish Friendly survey found that:
- 57% of people held most or all of their money in cash.
- 70% said they knew that this wasn’t the best use of their money, but
- 40% wanted to be able to access their money instantly.
- 38% were afraid of losing money through investments, and
- 34% said that they didn’t trust investment advice.
Will targeted support help?
We’ve looked at the introduction of targeted support and simplified financial planning already. The FCA have suggested that this will help people with around £35,000 to invest. This is likely to come from banks and big insurance companies and may help to boost confidence. Although there are going to be down side risks. For example, the provider is not going to have to suggest that full advice could be an option, and they will be able to refer people into their own tied advisers. Sounds a bit like what used to happen in the bad old days pre-2012.
I’m not sure that market leader St James Place are helping to build trust either. Despite saying that they were ending exit penalty fees for new customers in response to concerns raised by the Consumer Duty. It seems that they will still apply exit fees for existing customers up until 2036. Exit fees are charged if investments are withdrawn in the first six years. The rate is 6% for withdrawals up to 12 months reducing by 1% a year after that.
Get more information.
For more information about genuine investment advice why not contact Christina today. We offer a free initial meeting to discuss your requirements and explain how our service works. Have a look at the reasons people choose us.
You are under no obligation to use us after that if you don’t want to and we won’t pester you.
So why not call us today on 01282 614444 or e mail us enquiries@ccfps.co.uk or use our contact form online.
