Investments in binary options, contracts for difference (CFDs), forex and Bitcoin are often promoted online and via social media channels, such as Facebook, Instagram and Twitter.
After someone has invested, the prices are distorted on the website, people are tied in with extreme pay-out clauses and customer accounts are even closed with the firm refusing to pay back their money.
Six times more likely to fall victim
The Financial Conduct Authority’s latest study, conducted as part of its ScamSmart campaign, found those aged under 25 were six times (13%) more likely to trust an investment offer they received via social media, compared with over 55s (2%).
More than one in five (23%) respondents said that online customer testimonies and reviews increase their trust in an investment company. Yet, scammers are known to create highly professional looking online investment platforms that feature fake customer reviews, logos, and statements, to lure in prospective investors.
A further one in ten (11%) said they wouldn’t conduct any checks at all, such as making sure the firm was regulated by the FCA or registered with Companies House, before parting with their money.
If in doubt, don’t invest
Mark Steward, director of enforcement, FCA, comments: “As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media.
“Before investing online, check you know who you are really dealing with and check if they are authorised by the FCA. Find out how to avoid scams on the ScamSmart website, and if in any doubt – don’t invest.”
Nick Hewer, star of TV’s Apprentice and Countdown programmes, who is supporting the campaign, added: “Remember, if it sounds too good to be true, then it probably is. If you are offered an attractive investment out of the blue, be suspicious, check the FCA’s Warning List and seek impartial advice. Better still, if you get an email or message about an investment from someone you don’t know, just delete it.”
Epidemic of financial illiteracy
Jane Goodland, responsible business director at Old Mutual Wealth, said: “The government needs to give serious consideration to introducing financial education onto the primary school curriculum in order to tackle the current epidemic of financial illiteracy and give the generations of tomorrow the knowledge to identify financial scams.
“While the focus of this latest campaign is on younger people, it’s crucial that all parts of the population are appropriately sceptical when they get a unsolicited email, phone call, or are approached on social media. A healthy amount of suspicion and due diligence is crucial.”
To reduce the chance of falling victim to investment fraud, the FCA advises:
- Reject unsolicited investment offers whether made online, on social media or over the phone.
- Before investing, check the FCA Register to see if the firm or individual you are dealing with is authorised and check the FCA Warning List of firms to avoid.
- Get impartial advice before investing.
