How to avoid financial scams

Key takeaways:

  • If something seems too good to be true, it probably is.
  • Give yourself time to think before parting with personal information or money.
  • Speak to a professional before making big decisions about your finances.

Get Savvy Against Financial Scammers

Retired teachers Paul and Mary are devoted parents and grandparents to their three children and eight grandchildren. As their family started to grow, they decided they wanted to begin saving for their grandchildren’s future. Disappointed with the returns from their savings accounts, they decided to look into other investment opportunities. After comparing a number companies online, they settled on one and made a £30,000 bank transfer. Within just a few months, their initial investment had grown sizably.

Soon afterwards, their eldest grandchild passed his driving test. They decided they’d like to buy him a car, so they made a withdrawal. Being able to do this so easily cemented their trust in the investment company. Over the next year, they made several more deposits.

Paul and Mary then agreed they’d like to help one of their children with a deposit for a house. However, when they tried to withdraw the majority of their original investment, they couldn’t access their money or get through to the company by phone, email or any other means. It was at this point, they realised they’d been scammed.

On top of wiping out most of their life savings, the scam took a toll on the couple’s mental health. They both suffer from feelings of embarrassment and guilt, and Paul has developed severe depression.

Anyone can fall victim to a financial scam

Although Paul and Mary feel foolish, financial scams can be extremely sophisticated and trick the savviest of us. We’re used to hearing stories about elderly and vulnerable people being conned but recent research by Lloyds Bank found 18 to 24 years olds are most likely to fall victim to investment scams, making up approximately 25% of all cases. And, in fact, victims aged under 45 account for 70% of all reported investment scams.

Types of financial scam

Financial scams take many forms including high-return investment opportunities, like the one Paul and Mary fell for, pensions transfers and health insurance supplements. Criminals use phishing (emails) or smishing (texts) to impersonate trusted organisations and trick people into giving away their personal information or money.

Top tips to avoid being scammed

Follow the advice of UK Finance’s Take Five to Stop Fraud campaign:

1) Stop: Take time to stop and think before parting with money or personal information

2) Challenge: It’s ok to refuse or ignore requests that make you feel uncomfortable. Only criminals will try to rush or panic you

3) Protect: Tell your bank immediately if you think you’ve fallen for a scam and report it to Action Fraud

4) Great deals don’t come looking for you. Scammers often advertise on social media and the internet. They may also send ‘deals’ by email, phone or direct message.

5) Make sure it’s genuine. As in Paul and Mary’s case, scammers can easily set up fake companies, profiles and websites. Don’t underestimate the lengths a fraudster will go to in order to convince you they’re genuine. Before parting with any money, it’s a good idea to seek professional advice. You can also use the FCA website to check the details of financial services companies.

6) Protect your payments. Consider your payment method. It’s very hard to get money back if you pay by bank transfer. Paying by card offers the greatest protection.

If you’d like help with any aspect of your finances, we’re here to help.