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'Wine and diamonds' warning as investment scam risk rises

Published 25/05/2016

The City regulator says the over-55s face an increasing risk from investment scams
The City regulator says the over-55s face an increasing risk from investment scams

People aged over 55 are at a growing risk from investment scams involving products such as fine wines, diamonds and land, research from the City regulator has warned.

Low interest rates, which have hammered savers' returns in recent years, are driving the over-55s to consider investing in a wider range of products that they may be unfamiliar with, according to research for the Financial Conduct Authority (FCA).

As part of the FCA's ScamSmart campaign, to help protect investors from investment fraud, the study found 41% of over-55s have moved money out of savings into investments as the sustained period of low interest rates has led them to adopt riskier investment behaviour in a bid to get a better rate of return.

Of those questioned, over a quarter (26%) chose to invest in unregulated investment products and 23% are considering investing in unfamiliar types of investments.

People aged 55 and over were handed new freedoms in 2015 that mean they now have much greater choice over how they use their pension pot savings. However, fears have been raised this could make them more of a target for fraudsters.

There are concerns that people are being plagued with cold calls with offers of investment schemes. Nearly a third (32%) of over-55s reported being contacted by a firm offering investments in the last 12 months.

Of those, 40% have seen an increase in the number of calls and nearly four in 10 (37%) had been contacted as many as three times.

Unsolicited contact including cold calls, post and emails, are common techniques used by investment scammers, the FCA said.

It said more than a quarter (27%) of those who have fallen victim to investment fraud are scammed via an unauthorised firm selling unregulated products such as wine, diamonds and land.

Some 13% of those questioned were unaware that unregulated products bought through an unauthorised firm offered no protection from the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS), if something goes wrong.

Despite the risks, nearly half (48%) of those investing in unregulated products through unauthorised firms do so without getting professional advice or checking publicly available investor information, such as a warning list kept by the FCA. The warning list details firms and individuals that the FCA knows is operating without its authorisation.

The regulator is urging investors to act with caution when they are approached by unauthorised firms selling often high-risk investment products.

Its campaign is being backed by former star of The Apprentice turned Countdown host Nick Hewer, who said he had been targeted by cold call scams.

Hewer said: "Scammers are embedding themselves into people's lives and pretending to be close friends of their targets, frequently the elderly and those living alone, before draining their life savings on a false promise of great returns through bogus investments. The tactics that these criminals use are very, very sophisticated - they could suck-in even the savviest of investors, something that everyone should be aware of.

"I, too, have been targeted by unsolicited calls from scammers and would advise that if you ever receive a call offering you the investment of a lifetime, just put the phone down, as I did. Go by the rule that if it sounds too good to be true, then it probably is. If the investment was that good, everyone would be investing; if you are still in two minds, go to the FCA website and check the warning list. My best advice: when you receive a cold call - just put the phone down."

Previous FCA research found that those over 65 with savings of over £10,000 were three and-a-half times more likely to fall victim to investment fraud, compared with the wider population. Those living in London, the Home Counties and the South East were particularly at risk.

Mark Steward, director of enforcement at the FCA said: "Be sceptical. Be suspicious. Ask questions. Do your own checks before investing; check the FCA ScamSmart website, the FCA warning list and the FCA register to see if those that are asking for your money are the real deal. If you do experience investment fraud or suspect it, report it; our research found that 60% of those that have experienced investment fraud have not reported it, so the problem could be greater than we know and by reporting it you are helping us to protect others."

More than 2,300 people aged over 55 from across the UK took part in the research.

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