4 red flags that could be signs of a scam and what you need to know about them

Each year, Citizens Advice runs a two-week scam awareness campaign, aptly named “Scam Awareness Fortnight”. The organisation hopes its movement will raise your awareness of common scam tactics, and mean you’re confident that you know what to do if you spot one.  

This fantastic campaign comes at a convenient time, as investment scams have been on the rise in recent years. Indeed, FT reports that calls to the Financial Conduct Authority (FCA) related to investment scams have nearly tripled over the last five years. 

Unfortunately, the pressures caused by the cost of living crisis have created the perfect environment for scammers to foster false hope and tempt you towards investments that are too good to be true. 

So, what better time to read up on investment scams and protect yourself from them than Scam Awareness Fortnight? Read on to discover four tell-tale signs of scams, and what you should do if you spot a dubious investment opportunity. 

1. Offering “guaranteed” returns? Scam Red Flag.

One red flag to keep an eye out for is the promise of “guaranteed returns”. In the world of investing, it’s rare to find an opportunity that offers high or guaranteed returns for minimal risk.

In fact, the opposite tends to be true – low-risk investments typically offer slower-paced returns. Of course, past performance isn’t a reliable indicator of future performance.

If “get rich quick” opportunities did exist, it’s likely that everyone would be investing in them. So, a tell-tale sign of a scam is when an investment seems too good to be true. 

2. Pressuring you to make a quick decision? Scam Red Flag.

Another common tactic of scammers is to use high-pressure sales tactics to force you to make a decision quickly. “Maybe” won’t be a suitable answer, and the scammer will likely be persistent in persuading you to invest. 

The scammer may also not agree to you calling them back after you’ve mulled over the opportunity – they’ll likely either demand an immediate decision, or offer to call you back after a brief period of consideration.

They may even tell you that the investment is a short-term opportunity that others have already reaped the rewards of. Scammers will try to pressure you into making a quick decision as you may be more likely to take a risk on impulse. 

Or, if the scammer believes you seem wary of an opportunity, they may offer you bonuses or one-off discounts that make the investment seem even more alluring. 

3. Does the investment opportunity seem “unusual”? Scam Red Flag.

When the scammer presents you with an “unmissable” investment, some features of the opportunity may seem unusual and start ringing alarm bells. 

For instance, the details provided about the opportunity may be vague. Scammers typically use lots of jargon to confuse you. They also tend to focus on the headline figures, promising high returns rather than the fundamental features of the investment opportunity.

Suppose the opportunity has aroused your suspicion and you ask to see a website to confirm the company’s legitimacy. They may have multiple reasons for why they can’t give you a web address. Or, they might give you the address for a website that doesn’t have the details of its “once in a lifetime” offer. 

4. Contacting you out of the blue? Scam Red Flag.

It’s highly unlikely that a legitimate investment company would cold-call you out of the blue to offer you an investment opportunity. So, if you’re contacted unexpectedly by someone offering you an “exclusive” investment, you should be wary.  

These days, scammers will typically attempt to contact you by phone or email. However, you should still be vigilant of being approached with investment opportunities on your local high street or even by someone knocking at your door.

When they do manage to get through to you, scammers may attempt to ingratiate themselves with you. They could start asking about your family and any future financial plans you have. They could then use this information to empathise with you and reassure you that the opportunity is legitimate. 

What to do if you think you’ve spotted a scam

Ensure anyone who offers you an investment opportunity is legitimate

You can ensure that a company or individual offering you an investment opportunity is legitimate in several ways. For instance, you can search for the name of the company on the Financial Services Register, which is provided by the Financial Conduct Authority (FCA). 

This is a database of all FCA-authorised companies. If you can’t find the firm offering you the investment on this register, it may be wise to avoid it. 

Be on your guard

Before you make any sort of investment, you should ideally set a firm rule that you won’t be tempted by any unsolicited opportunities. 

It’s worth sticking to this rule at all times. If you’re called with an investment opportunity, hang up the phone immediately, or refuse to respond to a text or email. By doing so, you could deter even the most persistent scammer. 

Talk to an expert before investing

Perhaps the best way to protect yourself from investment scams is to speak with a financial expert you trust before you invest.

You could reduce the risk of falling victim to a scam by working with us before making an important financial decision, such as transferring your pension or paying a considerable sum of money towards an investment. 

Get in touch

If you believe you’re being targeted by investment scammers, or fear you’ve already been the victim of a scam, then we can help.

Please contact us for expert guidance on how you should approach the situation. 

Please note:

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.