More than $367 million has been lost in Australia to scams so far this year, with the majority attributed to investment scams.
Invitations to invest in financial scams come in many different forms in newspapers and magazines, by email, phone, social media, text message, post, in seminars or in person. Criminals often impersonate companies asking for investment in upcoming share floats, Ponzi schemes spread through social media, and crypto scams which promise their victims big returns.
Unfortunately, scams will always exist as long as there are people who think there is a fast track to wealth or who fail to read the ‘danger’ signs. Unfortunately scams often look realistic and are presented professionally. They have attractive documents; a business-like website and they use names that sound realistic. It is therefore, important to know what a scam might look like and the signs to look for, some of which are outlined below.
How to spot scams
It pressures you to invest - Scammers often say ‘don’t miss out’ and ‘act quickly before it’s too late’. They’re really just trying to grab your money before you have a chance to check properly.
It promises bigger or faster profits - Scams often offer a higher return than genuine investments. Some offer 20% a year, others go for 300% a year or even more. It’s too good to be true. By comparison, Australian shares are some of the most successful investments, and they have returned on average an annual return of 9% since 1993. Whether it’s high or low, never choose an investment based on return alone.
Trust your commonsense - Check the interest rate on your bank account as a reference point for realistic returns. If your bank account is only paying you 4% a year, and a promoter says you can earn 10% income a month, this is unrealistic and likely to be a scam.
It promises less effort or risk - Most scams say that financial success is easy, and risk isn’t a problem. But real wealth demands planning, hard work and patience. Even the best investors make mistakes and have to weather storms like market downturns and economic recessions.
It promises something special - It could be a ‘secret’ offer, ‘inside information’ or ‘new techniques’ to make you feel like you’ve got an edge over other people.
How to protect yourself from financial scams:
Remember the golden rule – if it sounds too good to be true, it probably is too good to be true.
Say ‘no’ to promoters who call you out of the blue and ignore direct messages via social media to anything you don’t understand, or to anything illegal.
Don’t click on any links in suspicious emails or text messages.
Always get a prospectus or Product Disclosure Statement (PDS).
Get financial advice from an Australian adviser before you invest your money.
Review your investments regularly to track their progress.
Check tax claims made by scheme promoters, so you know who’s making the offer and why.
As always please don’t hesitate to contact our office to speak with one of our dedicated financial advisers, before investing your hard-earned money in a scam.