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 poll1 by Nationwide.
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:
- 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.
- 7 per cent would invest with someone from an investment company who calls without any prior contact.
The good news is that more than half (51%) would check the FCA Register to check the company is authorised to offer investments and the contact details match and 47 per cent would check the FCA Warning List.
Two in five (40 per cent) would speak to their bank or building society and just over a third (34%) would speak to an independent financial advisor for information about investing. The same percentage would also go directly to the website of a company offering investments.
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.
According to Nationwide’s data, payments made to cloned companies have become more commonplace. This tactic sees criminals copy contact details, websites and employee names of genuine firms (e.g. Legal and General, Aberdeen Standard or Aviva) or invest in bonds and cryptocurrency. Although the rates may appear genuine and the company may exist, there's no guarantee that the person making the offer actually works there.
With cryptocurrency, despite not being regulated in the UK, anyone can buy and trade on its value, but victims are typically tricked into trusting a ‘broker’ or an app to do all the hard work. Money can be sent to a legitimate currency trader, but the account that is set up for someone could be being accessed by someone else to withdraw from it.
Emotional impact of being scammed:
According to the poll, the three most common feelings after being scammed are anger (69%), becoming upset (52%) and feeling embarrassed (41%). Among the age groups, anger is the overriding emotion for older people (77% of 55-64s and 85% of 65+), while younger people are likely to feel a sense of embarrassment (48% of 25-34s).
It’s this range of emotions why only a small number of people would tell friends (22%), parents (19%) and other family (17%), with only 14 per cent saying they would tell their children, with 42 per cent saying they are most likely to tell their partners.
Despite the financial impact of falling victim to an investment scam, only 44 per cent would tell their bank or building society, while only 55 per cent would tell the police. However, when asked about who they would call first if they fell victim to an investment scam, more than one in ten (13%) said they didn’t know who to call first. Nearly a quarter (23%) would call the police first, followed by their bank or building society (22%) and then Action Fraud (14%).
Double jeopardy:
Being scammed once doesn’t mean that people are less susceptible to becoming a victim again. In some cases, scammers will try again soon after. According to our research, around one in seven (15%) admitted that if they had fallen victim to a scam and then a company called them out of the blue to say they could get their money back for a small fee, they would do it. Younger people are more likely to do this with 26 per cent (of 18-24s) and 25 per cent (of 25-34s) admitting they would take up this ‘offer’.
Perhaps understandably, more than half of respondents (54%) said it would put them off investing for life if they were to fall victim to a scam and this is particularly true amongst women (60% versus 47% of men).
Ed Fisher, Nationwide’s Head of Fraud Policy, comments: “One of the unfortunate side-effects of the pandemic has been a rise in investment scams. Criminals try to take advantage of any uncertainties and a low interest environment to target people with increasingly sophisticated tactics. And they are bold too – they even target victims again with ‘recovery scams’ by promising to get their money back for an upfront fee.
“It’s crucial to undertake proper research and due diligence before handing over your money. Being especially cautious is the best defence, even if you are proactively looking for an investment and you find what appears to be a legitimate company, you still need to confirm the site is genuine and you are dealing with someone who works there. And take care to question where the money is going. We will always warn you if an account name and number don’t match, so if someone tells you to send it to a name that’s different to the exact trading name of the firm, it could well be a scam. Always check the FCA Register and the FCA Warning List as it has listings of legitimate firms’ details, and firms that are known to be impersonated.
Nationwide’s top tips on how to spot an investment scam
Warning signs that you might have been contacted about an investment scam include:
- 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.
- 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.
- 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.
- 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.
- False authority: They might use convincing literature and websites, claiming to be regulated and speaking with authority on investment products.
- 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:
- Check the firm is authorised by the Financial Conduct Authority (FCA). You can do this by using the register on the FCA’s website.
- 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’.
- 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.
- Do your research and always get independent advice. Use the FCA Warning List to check the risks against any potential investment.
- 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.
Nationwide has information on different types of scams and how to spot them on it’s website: https://www.nationwide.co.uk/products/other/landing-page/fight-fraud
