IN­VEST­MENT SCAMS

Avoid­ing the Traps

Reader's Digest Asia Pacific - - Front Page - BY DONYALE HAR­RI­SON

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.

THEY LIKE TO COLD- CALL

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 l at e st scam do­ing the rounds.

YOU ARE TAR­GETED ON­LINE

The in­ter­net pro­vides scam­mers with a very so­phis­ti­cated av­enue for do­ing ‘busi­ness’. Us­ing Face­book ads of­fer­ing ac­cess to ‘unique op­por­tu­ni­ties’, ‘mate’s tips’ in on­line fo­rums and even of­fers in un­so­licited emails, scam­mers trick on­line users into think­ing they are the one ini­ti­at­ing con­tact, when in fact you are tak­ing a very clever bait.

Re­mem­ber, when you conduct any on­line re­search into com­pa­nies you may wish to in­vest in, or look for fi­nan­cial ad­vis­ers, be care­ful what links you open. Don’t fall for the un­so­licited mar­ket­ing that may clut­ter your screen with pop-up ads and of­fers – it could be a scam­mer.

“YOU CAN’T LOSE. DON’T DE­LAY”

Any rep­utable in­vest­ment ad­viser will tell you that you can lose. While some op­tions are safer than oth­ers, noth­ing is guar­an­teed. A re­li­able ad­viser will rec­om­mend you spread your risk across sev­eral types of in­vest­ment, whe reas s ca m m e r s will of­ten en­cour­age you to fo­cus on just one, or de­clare that their port­fo­lio is ‘risk-free’. In­vest­ment scam­mers push their ‘prod­ucts’ by build­ing a sense of ur­gency and ex­clu­siv­ity. Look out for claims of ‘limited op­por­tu­nity’. This ap­proach is par­tic­u­larly true of in­vest­ments pro­moted at ‘wealth cre­ation’ sem­i­nars, where in­vestors are urged to sign on the dot­ted line right there and then. This re­moves any chance of seek­ing in­de­pen­dent ad­vice or time to con­sider whether the in­vest­ment is worth the val­u­a­tion given, or if the charges are rea­son­able. Some in­vest­ment scams have ac­tual items of worth as part of the scam, but ask you to pay in more than you would re­ceive as your part of the com­pany’s as­sets if the scheme was wound up. Never com­mit to any

in­vest­ment with­out ob­tain­ing in­de­pen­dent le­gal or fi­nan­cial ad­vice first.

THEY WON’T STOP

Rep­utable firms take no for an an­swer. They may fol­low up an ini­tial con­tact from you with one or two of­fers, but a re­quest to stop con­tact will be hon­oured. Scam­mers will sometimes take a hard ‘no’ reply, but just as of­ten a ‘more se­nior’ staff mem­ber will come back to you with more in­for­ma­tion as to why you should in­vest with them.

WHAT CAN YOU DO?

In NZ if you re­ceive a scam by text mes­sage, sim­ply for­ward it to 7726 SPAM, and of­fi­cers at the Depart­ment of In­ter­nal Af­fairs will in­ves­ti­gate. In AU you can also re­port scams to ACCC’s Scamwatch at scamwatch. gov. au/ re­port-a-scam.

Bau­mann says, “Cus­tomers should al­ways check that the per­son they are talk­ing to is who they say they are. Ask them for their cre­den­tials, ABN or the num­ber of the Aus­tralian Fi­nan­cial Ser­vices Li­cence they op­er­ate un­der.”

If at any point the con­ver­sa­tion seems un­com­fort­able, feel free to say no. Scam­mers will of­ten cre­ate a sense of ur­gency. They may try to test your bet­ter judge­ment by claim­ing that some­thing needs your im­me­di­ate attention. “Ed­u­ca­tion is key,” says Bau­mann. “Read up on what to look out for, so you don’t fall for it. Scamwatch is a good source of in­for­ma­tion. The Com­mBank web­site also has tips and ad­vice for cus­tomers on how to stay safe on­line at www.com­mbank.com. au/per­sonal/sup­port/se­cu­rity.html.” You should also check de­tails of com­pa­nies you are con­sid­er­ing in­vest­ing in by check­ing the NZ Com­pa­nies Reg­is­ter at com­pa­nies-reg­is­ter. com­pa­niesof­fice.govt.nz, ASIC’s ABN look-up on­line ser­vice at abr. busi­ness. gov. au, and make sure they are not on this list: moneys­mart. gov. au/ scams/ com­pa­nies-you-should­not-deal-with/. Then check to con­firm that t he com­pany is reg­is­tered and al­lowed to of­fer fi­nan­cial ser­vices at fma. govt. nz/ news- an­dresources/warn­ings-and-alerts/ un­reg­is­tered-busi­nesses/. Greet all un­so­licited in­vest­ment sug­ges­tions with an enor­mous amount of scep­ti­cism. The old adage ‘if some­thing seems too good to be true, it prob­a­bly is’ def­i­nitely

In­vest­ment scam­mers push their ‘prod­ucts’ by build­ing a sense of ur­gency. Look out for claims of ‘limited op­por­tu­nity’

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