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4 common financial scams, and 6 effective ways to protect yourself from them

History is littered with examples of wily fraudsters taking advantage of unsuspecting individuals and stealing their money. There have been countless scams, from the “sale of the Roman empire” scam in 193 AD to the original Ponzi scheme in 1920, and its many derivatives.

Usually this was done by word of mouth or newspaper advertisements. But more recently, extraordinary advances in online technology means scammers can target you remotely without having to meet you face-to-face or even talk to you on the phone.

Most financial scams these days tend to fall under two different categories:

  • Those looking to obtain your personal information in order to be able to target your bank account and other financial holdings
  • Those looking to persuade you to buy a financial product that’s either fraudulent, or inappropriate for your needs.

4 common financial scams to look out for

To help you be aware of scams that you may be targeted with, here are four of the most common.

1. A bogus call from your bank

You get an urgent call from someone who says they are calling you from your bank to tell you your account has been targeted by fraudsters.

Your phone screen may show a familiar number and the person calling could well know some personal information about you that makes it all sound plausible.

They will ask you to transfer your money to a “safe” account, and they’ll give you the account information.

Research carried out last year by Santander confirms that half of us would fall for such a scam.

2. Bogus text messages

Scammers often target your personal financial details. Once they have these, they can access your money and clear your account in a matter of minutes.

A common method is to send you a text message asking for personal details. This will involve a plausible financial story that you may fall for. For example, Which? has recently highlighted such a scam involving the government payment towards energy bills.

Others may tell you that you’ve overpaid tax and are due a refund from HMRC, with the aim that you complete the form – including your bank details – to claim your refund.

3. The short-term investment opportunity

You’ll be offered an investment opportunity that will give you a substantial return after a certain period.

It’ll be a short-term opportunity, so you’ll be encouraged to act quickly to take advantage of it.

In reality, the opportunity doesn’t exist, and your money will disappear – along with the scammer.

4. Pension “liberation” schemes

You can’t access your pension fund until you reach age 55, increasing to age 57 in 2028.

Given that your fund may be substantial, it’s likely you could be open to an opportunity to access your fund early.

Scammers often exploit this by offering a scheme that “liberates” your pension fund. In reality, you’ll be the victim of a scam and could end up losing much, or even all, of your fund – with a large tax bill to rub salt into your wound.

In both this and the short-term investment opportunity scam, the perpetrators could well pose as financial or investment advisers. In just the first quarter of this year, the Financial Conduct Authority issued more than 760 warnings about unauthorised financial firms.

6 ways you can help protect yourself from financial scammers

Although scammers are becoming more and more sophisticated, and the number of scams is increasing, there are some simple ways you can protect yourself from falling victim and losing money to them. You can also help protect others by sharing these details with your friends and family.

All of these are simple and should help deter even the most determined scammer.

1. Never forget the golden rule

This relates specifically to investment scams.

The golden rule is, quite simply, that if you think an offer or investment opportunity sounds too good to be true, it nearly always will be.

If you bear that in mind when it comes to investment products you see, or deals you’re offered, then you’ll stop a lot of scam attempts before they even start.

2. Always slow down and take your time

Financial scammers will often try to rush you into making a decision

They know that, if you’re rushed, you’re more liable to make a mistake or a decision you’ll later regret.

One way of making you hurry is to suggest that a particular opportunity is short-term and “only available today.”

If it’s the type of bank scam targeting your account you read about earlier in this article, they’ll say you need to act quickly because your account is being targeted “right now”.

So, an easy way to help protect yourself is to deliberately slow down and think about what you’re being offered. When you do that, you’re far more likely to spot anything untoward.

3. Don’t buy anything from a cold-caller

Very few people would ever buy something from someone who walked up to them in the street and offered it. So, adopt the same approach with offers you get over the phone or by email that you haven’t solicited.

By automatically being wary, even if it sounds a tempting opportunity, it’s unlikely you’ll fall victim to any opportunistic scammer.

Pension cold-calling was banned in 2019, so any communication of this nature is likely to be a scam.

4. Take care if you’re sharing personal details online

Sharing your personal details online can also raise obvious security issues.

Never fill in a form asking for your personal details online unless you’re totally sure it’s a legitimate request.

Even if you aren’t responding to a request, and have instigated the financial transaction yourself, always be on your guard.

Scammers have been known to set up bogus websites to tempt you into giving up your details and money. You may see what looks like a perfectly normal advertisement, which will take you to a plausible, well-designed website. Instead, it will be fraudulent.

5. Research companies you transact with online

Always try to research companies you’re dealing with online for the first time. Look at online reviews or carry out a simple search engine check on the company name.

Then, if you’re buying from them on their website, check that it’s secure. There will be a padlock symbol next to the web address if the site is encrypted.

6. Be careful when sharing your bank details with third parties

Scammers will often target unencrypted online communication to try and steal your bank details.

You can protect yourself quite easily by not sending all your bank details in one message if you need to supply them.

Even if you’re sending the information to someone you know and trust, split up the details. Use email for one part of your bank account details, and a text or WhatsApp message for the other.

Get in touch

If you have been offered an investment opportunity and want to check it is legitimate, seeking professional advice first can help you to avoid becoming the victim of fraud.

If you’d like to talk about your financial planning, or other financial issues, then please get in touch.

You can call me on 07769 156 250.

Please note

Accessing pension benefits early may affect levels of retirement income and is not suitable for everyone. You should get advice to understand your options at retirement.

Foster Denovo Limited is authorised and regulated by the Financial Conduct Authority.