How does an investment scam play out in real life? 

One of most common ways we get sucked in to an investment scam is a telephone call out of the blue, from someone who appears plausible, knowledgeable and legitimate.

However, the increasing use of social media ads, online testimonials and fake endorsements are also being used by scammers to ‘entrap’ potential investors into fraudulent investment schemes.

But how do we know, how can we tell the fake from the genuine?  What are the signs we should be looking out for? How can we tell that someone is trying to scam us? How does an investment scam play out in real life? 

How does an investment scam format work?

According to Crimes of Persuasion, an online resource dedicated to identifying all types of investment scams, a  typical fraudster might take the following approach: 

Call 1: The ‘warm-up’

Introductory call where the tone of the conversation will be chatty, friendly, familiar: attempting to find common ground. Caller will refer to their firm’s track record, and quality of their research.

Will end call by requesting permission to send a brochure and to call again if anything of interest pops up. 

Call 2: The ‘set-up’

Having secured permission to call again (assuming you haven’t already been screened out), then a follow-on call will usually be made to alert you to an interesting investment opportunity they think they can get you in to. 

Call 3: The ‘close’

You will be passed on to another individual whose role will be to add a degree of urgency to the opportunity: “you need to invest now (today, this week) or you could miss out” 

What form does the ‘investment pitch’ take?

Scammers will be working to a script that has been cleverly written-up to lure you in or the ad will be worded in such a way that is both reassuring and appealing.

The sole objective is to present you with an investment opportunity that is better than anything else in the market. They will deploy all kinds of false claims and high-pressure sales techniques to achieve that.

The ‘investment pitch’ will be a list of bullet points that will be systematically worked through. So, what should you watch out for? 

1. Claim to be a qualified financial adviser, experienced in off-market private investment opportunities.
2. Claim to be authorised and regulated by the Financial Conduct Authority (FCA) and may even have cloned the details of a legitimate firm.
3. Claim to have a track record of success and will point to reviews and testimonials on their website (all fake of course).
4. Claim the opportunity has come about because of their high-level connections. They have access to information that is not available to the wider public. 
5. The return you will get is much better than you would earn by leaving it in the bank. 
6. The return on your money is better that you can get anywhere else (but not too good to be true, to avoid arousing your suspicion).
7. The investment is secure and asset-backed so the risk of losing your money is minimised.
8. If you are unsure about investing, there is a buy-back guarantee after a certain amount of time (usually one year).
9. The opportunity is a regulated investment product and protected under the government’s Financial Services Compensation Scheme (when it is not). 
10. The opportunity is pre-IPO (Initial Public Offering), which means the company is still privately owned, so not many people will know about it going public (getting listed) just yet.
11. The opportunity is available for a restricted period of time only and once the capital needed has been raised then it will be closed to new investors.
12. The opportunity is exclusively available through them or they have received a fixed, limited allocation of shares (or bonds or units) to sell.
13. If you remain unsure about their credentials, check the FCA Register (details will be cloned of course, or include a minor typo which you may not notice). 
14. High-pressure sales tactics: make the decision right away or lose the opportunity.
15. End with flattery (you are a smart investor) or mild threats (implying there are many other interested investors so you could miss out if you don’t act quickly). 

How to deal with investment scammers?

The first rule is do not be afraid to hang up if you have any suspicions at all about the caller’s motives. If you do decide to engage in the call then please note the following: 

• You should never provide your personal or bank account details to anybody over the phone
• The caller may let you think he or she has your bank details and are just asking you to confirm them. But do not be fooled by this. Ask them to confirm the last 4 digits
• Never be intimidated into making a quick decision despite the pressure they will apply 
• Let the caller know that you first need to check the FCA website and then ask them to call you back at a later date 
• Ask questions about the caller’s credentials and note their response:  

1. Do they have an up–to–date SPS Certificate (Statement of Professional Standing)? 
2. What is their FCA registration number? 
3. What are their professional qualifications? Do they have a Diploma in Financial Advice (DipFA), for example? 
4. Is the investment product regulated by the FCA? 

• Finally, never part with money over the phone or agree to make a bank transfer without doing your own due diligence first. 

Reporting investment scams 

If you believe that you have been the target of an investment scam then please report it to the Financial Conduct Authority, by clicking here.

If you have been the victim of an investment scam and have lost money then please report it online to the police through Action Fraud.