A scam – the biggest investment loss you can make

One of the biggest concerns for an investor is losing money. While a vigilant investor will consider all asset classes and risk profiles to suit their needs and ensure returns; in my experience, the biggest investment loss you can make is through a scam.

While over the years there will be investments that don’t perform as well as others for a period, investment markets do move upwards over the long term. What’s more problematic is total financial loss, or 100% of your capital.  When it comes to a scam, this can happen very quickly.

The Australian Competition and Consumer Commission (ACCC) reports that Australians lost over $107 million to a scam in 2018. with investment scams being the number one cause  of financial loss at $38 million.

Victims to scams come from all walks of life and they are increasingly common, with cases of investors being ‘groomed by what appears to be a legitimate source.

Investor scams are no longer confined to the realm of Ponzi schemes. Surprisingly, most investment scams focus on unlikely targets – traditional investments such as stocks, property and commodities.

Our clients are being forced to navigate them regularly. While most may appear obvious (Nigerian Prince asking for a bank account to deposit their money!) Those creating the scams are becoming sophisticated, and even the smartest of investors can be caught.

The following is a list of some of the scams we have seen our clients face over the last few years:

  • A client was contacted directly by an overseas company and convinced to buy overseas bonds generating a supposed 12% return. Such bonds never existed, and the client lost their entire capital.
  • A client was harassed over the phone for two hours as “Microsoft” progressively downloaded their entire computer’s records. Fortunately, no financial loss has since arisen.
  • A request from our client’s email, asking us to withdraw funds from their bank account. Fortunately, we realised it was a hacker when we made follow up calls to authenticate this prevented payment.
  • Numerous clients receiving a phone call from the “ATO” claiming they owe money and will go to jail if not paid immediately. Fortunately, clients called us first and did not provide them with payment.

The good thing is in almost all cases, our clients were suspicious of strange interactions and we would encourage everyone to continue to do the same. When it comes to determining if you are part of a scam, looking at the method in which they contact you, rather than the investment offer is the best place to start.

The following are some good Government websites with a list of things to look out for to help prevent yourself being scammed:

https://www.scamwatch.gov.au/get-help/protect-yourself-from-scams

https://www.moneysmart.gov.au/scams/avoiding-scams

Don’t become another victim, another statistic. When in doubt, it’s always best to check with your advisor first, because scams are frequent and inevitable and the biggest investment loss you can make.