How to spot a ponzi scheme

EXTRAVAGANT PROMISES ARE RARELY TRUE With just 6% of savers likely to have enough for retirement, it’s easy for panic to set in. And that is the moment ponzi practitioners are waiting for. So remember these points.

practical steps you can take to improve your situation. These include delaying retirement and rethinking your priorities.

Regardless of your age, it is important to take a considered approach and not to be lured by false promises.

Beware of people or groups who guarantee a profit.

If you invest with a reputable investment house they should be transparent about the risk you are taking and the return you can expect.

Ponzi schemes, however, promise to make you quick wins, not on your own money, but rather on money put in by investors who join at a later stage. As it is very difficult to recoup losses for victims from ponzi schemes, it is important to be able to identify suspicious activity.

Promises of high returns, which could not be achieved through normal conventional investment opportunities, within a short period;

Promises of “guaranteed” returns – make sure you understand who is making the guarantee and whether they can or will pay up. No return is ever really guaranteed. All investments carry some risk;

Attractive stories from other existing members of how much money they have made through the scheme; Opaque business models; Statements like “an opportunity of a lifetime”;

Lack of clarity around underlying investments;

Very high initial returns and encouragement to invest more; and

Unregistered products. Ensure you invest with a reputable firm or an experienced investment manager. Financial services firms are regulated by the Financial Services Board (FSB) and they can assist if you want to assess the authenticity of an offer or a provider.

Finally, you may wish to speak to an independent financial advisor.

Thandi Ngwane is head of strategic markets at Allan Gray.