Thousands of people have millions of pounds stolen through investment scams every year. The internet, and advances in digital communications, mean these kinds of scams are becoming more common and harder to identify. Thankfully, there are some warning signs, which you can use to avoid falling victim to scammers.

What is an investment scam?

Investment scams aim to get unsuspecting people to hand over money – they can seem perfectly legitimate, appearing knowledgeable with websites, testimonials and marketing material.

The most famous kind of investment scam is a Ponzi Scheme, where money is collected from new investors to pay previous investors. Eventually, the money owed is more than the money being collected and the scheme collapses, leaving all the investors out of pocket.

Today, due to the internet and digital communications, investment scams can be much more complex. Some of these scams are so convincing, even professional investors have fallen victim to them.

Some common scams include where scammers clone the websites of legitimate firms, or get you to invest in scam and unregulated investments which offer returns much better than the rates being offered on savings accounts.

Since the pensions freedoms were introduced in April 2015, people from the age of 55 are particularly vulnerable to investment scams because they can access cash lump sums from pension pots. However, it's worth being aware that scammers lie and convince people of any age to transfer into other (illegitimate) vehicles before 55. 

All investment scams have one thing in common – they claim to be able to offer high levels of return for very little risk. If it looks too good to be true, then it probably is, and should be avoided.

How to spot an investment scam

Make sure you’re aware of the warning signs that might indicate an investment opportunity is a scam:

• Unsolicited approaches by phone call, text message, email or a person knocking on your door.
• When a firm doesn’t allow you to call them back.
• Where you’re forced to make a quick decision, or are pressured into doing so.
• Contact details you’re given, or found on their website, are only mobile phone numbers or a PO box address.
• You’re being offered a high return on your investment, but are told it’s low risk.

How to protect yourself from investment scams

To avoid being caught out by a scam, make sure you follow these simple rules.

1. Reject or ignore any unsolicited calls, emails, text messages or visitors to your door. Legitimate investment companies won’t cold call or contact you out of the blue.
2. Check the FCA register of regulated companies on the FCA website Or check the FCA warning list
3. If you’re thinking about an investment opportunity, get independent financial advice from an FCA-regulated firm.

What to do if you think you’ve been targeted

If you think you’ve been targeted by an investment scam, report it to the FCA ScamSmart website. If you’ve been targeted, even if you’re not a victim of it, you can report it to Action Fraud. Call 0300 123 2040 or use the online reporting tool on Action Fraud website

Beware of being targeted in the future, particularly if you had money stolen through a scam. Fraudulent companies might take advantage of this and offer to help you get some or all your money back. Ignore anyone who contacts you and claims to be able to help you get your money back.

If you’ve been sold a product that wasn’t suitable for you but the firm responsible has gone bust, you might be able to get something back through the Financial Services Compensation Scheme.