Last year, Australians and New Zealanders lost a reported $31.3m and $10m respectively to scams, with investment scams promising fast profits at low or no risk. Many of the people targeted by cunning scammers were wealthy individuals who consider themselves savvy investors, and yet they still fell victim. One person is said to have lost more than $1 million to an investment scam before he finally reported the crime to the police.
Scams are successful because the people running them know just what tricks to use to build a sense of trust in their unsuspecting victims. This cunningness means even seasoned investors should not be complacent.
There’s no shame in making a mistake. NZ’s Commission for Financial Capability (CFFC) offers this advice: “If you have been victim to a scam, don’t be too hard on yourself. Scammers are experts at what they do and rely on people’s busy lives to distract them from the intent of their emails.” Scammers present a slick, professional appearance and often come with a raft of ‘documentation’ – quality websites and flyers, ‘reviews’ and a ‘history’ of successes. But there are ways you can spot an investment scammer. Look for these telltale signs.
The vast majority of investment scams begin with a cold-call offer over the phone. Reputable financial services won’t initiate contact this way. While your bank may occasionally call you, it will always do so for a specific reason, and generally in response to your own attempts to contact them. According to Michael Baumann, General Manager, Everyday Banking and Payments, at the Commonwealth Bank, a bank will never call a customer out of the blue and seek confirmation of secure information. “We will never contact customers asking for their credit card number, card PIN, [online banking] password or code,” he says. “If customers opt to receive marketing material from their bank, we will send general information about a product or service, and invite them to read more on our website, visit a branch or get in touch with us. We won’t ask them to send us money or confidential personal information.”
If you are contacted over the phone by someone purporting to work for a major bank, financial services firm or even a telecommunications company, and you’re not sure whether or not it’s a scam, call back through the company’s main switchboard (not the number the caller gave you) to check that the person works for that company in the capacity they have alleged. Alternatively, a quick Google search of the company name or phone number and the word ‘scam’ can often bring up details about the latest scam doing the rounds.