How to spot investment scams

Nationwide offers top tips on how to avoid falling victim to sophisticated, tech-savvy criminals.

More people are turning to investments in the pandemic to try and make more of their savings, with people willing to invest an average of around £23,000, according to a new poll by Swindon-based Nationwide Building Society.

Yet despite the increased enthusiasm to invest, particularly in an ultra-low interest rate environment, a lack of knowledge and the ability to spot what is real and what is fake is leaving many open to becoming victims of scams.

According to the poll of 2,000 people by Nationwide, more than two in five (44%) Brits would consider turning to investments in the hope of bigger returns. However, one in five (20%) don’t know where to get information and advice to help them with investing and nearly a quarter (22%) say they don’t know how to check whether an investment company is genuine or not.

The way investments are made is a cause for concern. Worryingly, one in five (19%) believe an online advert is sufficient to prove it’s a genuine firm. This lack of awareness is potentially leaving people open to being victims of scams.

Nationwide Building Society’s own data shows the number of investment scams reported by members in 2020 increased by 79%, compared to 2019 as fraudsters are increasingly being successful in convincing people to ‘invest’. 

Nationwide’s poll also highlights that 19 per cent would invest with someone contacting them via email after registering interest on a website, 15 per cent would invest after researching a company online and then completing an application form and 7 per cent would invest with someone from an investment company who calls without any prior contact.

Scams are becoming increasingly more sophisticated. Previously, common scams spotted by Nationwide largely centred around 'too good to be true offers' that were offered to unsuspecting victims via cold calls or emails. Today, scammers are using a range of technology and tactics to trick people into handing over their money.

Nationwide’s top tips on how to spot an investment scam

  1. Unexpected contact: Scammers often cold-call, but contact can also come from online sources after you’ve looked for an opportunity yourself, like filling in a form following an online search or responding to a social media post.
  2. Pressure: You might be offered a bonus or discount if you invest before a set date, or you might be told the opportunity is only available for a short period. Beware. Reputable firms don’t put their clients under this kind of pressure.
  3. Social proof: The fraudster may share fake reviews and claim other clients, including celebrities, have invested or want access to the deal to try and woo you.
  4. Unrealistic returns or easy money: Fraudsters often promise returns that sound too good to be true, or an app that does all the work for you.
  5. False authority: They might use convincing literature and websites, claiming to be regulated and speaking with authority on investment products.
  6. Flattery: They may try to build a friendship with you to lull you into a false sense of security.

Nationwide’s top tips to avoid falling victim to an investment scam:

  1. Check the firm is authorised by the Financial Conduct Authority (FCA). You can do this by using the register on the FCA’s website.
  2. Check it’s not a ‘cloned company’ as fraudsters can pretend to be a genuine firm. Do this by checking for any other websites under the same name and the FCA’s register of known ‘clones’.
  3. Use the FCA’s register for contact details, not the details given to you directly from the company, or by the person who made contact with you.
  4. Do your research and always get independent advice. Use the FCA Warning List to check the risks against any potential investment.
  5. Check payment details thoroughly.  Don’t be fooled by stories about why a payment needs to go to a slightly different account name than the company name.  Once it’s gone, it’s gone.