Investment fraudsters in the UK caused citizens over 55 years of age to lose on average £32,000 in 2016, according to data published by the UK Financial Conduct Authority (FCA). One of the most common methods used by fraudsters to persuade victims to invest is to pressurize them to make a quick decision on a time-limited investment offer.
Some 53% of the over 55s in the UK believe acting quickly can be key to getting a good deal. These investors could be vulnerable to this tactic as this kind of attitude is exploited by fraudsters who offer time-limited deals.
The provided data is from a research that is part of the FCA’s ScamSmart campaign. It was based on the responces of 1,004 british adults aged 55+, in social grade ABC1, with a gross household income of £30,000+ and/ or savings of £5,000+. The survey was carried out online between 27 January to 6 February, 2017.
In general, fraudsters are targeting the growing over 55 population because they are more likely to have money to invest. However, only 42%, or two in five, British seniors think they know how to spot an investment scam. Moreover, about one third of over 55s are reluctant to discuss their investment decisions with others. This is seized on by fraudsters who encourage them to keep their offer a secret and not to seek advice from others, which could dissuade them from investing.
“Be alert to the warning signs like being contacted out of the blue, promises of low risk and/or guaranteed above market returns, special deals just for you, time pressure and, very often, flattery,” said Mark Steward, director of enforcement at the FCA. “Be vigilant. Don’t let them push you into making a decision and parting with your money. Question their claims. Check the Financial Services Register and seek impartial advice. If in any doubt – don’t invest,” he noted.
A large share (45%) of the surveyed over 55s said investment opportunities are more attractive if they know of others who have made similar investments. This fact gives fraudsters another opportunity to exploit by saying that others want in on the deal or have already benefitted.
Other common tactics used by fraudsters include:
- Offering lucrative returns above the market rate and downplaying the risks of the investment
- Using flattery to make potential victims feel good, such as praising them for being a knowledgeable investor
- Saying that the deal is only available to the target and asking them to keep it a secret
- Saying that other clients have invested or want in on the deal (known as ‘social proof’)
- Putting them under pressure to invest in a time-limited offer
Interestingly, those surveyed were more aware of certain signs of investment fraud, but less aware of others. For example, 92% agreed being contacted out of the blue could be a warning sign, but 19% were unaware that being promised returns above the market rate could also be a tactic.
Investors should be aware that they can claim a compensation of up to $50,000 under the Financial Services Compensation Scheme (FSCS) in case something goes wrong, but only if the broker they are working with is regulated.
Earlier this week, the FCA reported 17% of investment enquiries with its Consumer Contact Center, which is the largest share, were regarding binary options. Forex-related enquiries made up 13% of the total. Concerning binary options, consumers have been contacting the regulator mainly to verify whether firms offering such products are regulated.
When engaging with unauthorized and non-regulated brokers, traders are putting their investments at higher risk. We strongly advise you to only deal with regulated forex brokers, authorized by reputable regulatory bodies like CySec, FCA, and CFTC/NFA, among others.