Fund watch
Investment scams: what they are and how to avoid them
On the rise – and harder to spot
Scams and fraud increased 23% in the first quarter of 20231 – and it’s not just the sheer number of scams that’s on the rise. The amount of money lost is increasing, too. According to data from CERT NZ, Kiwis lost nearly $6 million to scammers in the first quarter of 2023, a 66% increase from the previous quarter1.
Investment scams can be particularly damaging because they typically involve large amounts of money, such as a person’s retirement savings. With new scams emerging all the time, it’s more important than ever to understand how these scams work, how to spot them, and what you can do to help keep your money safe.
How they work
An investment scam aims to trick you into investing in a fake business opportunity or financial product. Scammers will often lure you with the promise of big returns, low risk, and exclusive insider information.
Many scammers are experts at impersonating real businesses, which is why they can seem so believable. The scams are often elaborate, involving Google ads, slick-looking websites, detailed financial presentations, or in-depth phone conversations. The person on the other end of the line sounds just like a financial adviser or company representative. You might even receive a glossy investment prospectus in the mail.
By the time you realise you’ve sent your savings to a scammer, it’s often difficult to recover the money.
What to look out for
Investment scams often start with the ‘opportunity of a lifetime’. You might be offered the chance to purchase shares in a company, buy cryptocurrency, or invest your savings in a term deposit, foreign exchange, or gold and other precious metals.
All of these can be legitimate investments – but they’re also common signs of an investment scam. Is there urgency behind the offer or pressure to decide quickly so you don’t ‘miss out’? This is a common tactic of scammers and should raise an instant red flag.
Tips to help protect your money
If you’re approached with an offer to invest, or exploring an investment opportunity, it’s important to make sure it’s legitimate before handing over your money. If it’s too good to be true, or comes out of the blue, it could be a scam.
Be sceptical
Always be cautious if you’re presented with any unexpected investment opportunity. You should be sceptical if it comes from:
- A company that isn’t registered with regulatory agencies or doesn’t provide clear information.
- An unexpected phone call or social media chat from someone you don’t know, even if they appear to be from a real company.
Be wary of scam websites when searching online for investment opportunities. Scammers will often build sophisticated websites that look just like the real deal.
The best advice is to only deal with people you know and trust. If something doesn’t seem right or is unexpected, question it.
Do your research
Before investing money, research the company, the investment opportunity, and the people behind it. Look for information from independent sources, including regulatory agencies, financial analysts, and trusted news sites. Use the contact details on official company websites to check whether the person you’ve been speaking to really works there.
Take your time to look into it thoroughly – even if you’re being pressured to decide. And before you do anything with your money, talk to a licensed financial adviser or investment professional.
Manage your social media profiles
Be careful with how much you share on social media. Scammers can use what you share to gain your trust or see where you might be vulnerable.
Be cautious about talking to people you don’t know online – even if they seem to be from reputable organisations. It’s a good idea to check your privacy settings regularly to make sure you aren’t sharing more information than you’re comfortable with.
More tips to stay safe
With scams and fraud on the rise, it’s important to keep your wits about you whenever you’re thinking about parting with your hard-earned money. Our guide to banking safely has more simple tips for staying safe.
This article has been prepared by ANZ New Zealand Investments Limited (‘ANZ Investments’) for information purposes only and it should not be treated as financial advice.
MFL Mutual Fund Limited is the issuer and manager of the MFL Mutual Fund. ANZ Investments is not an authorised deposit taking institution (ADI) under Australian law and investments in the scheme aren't deposits in or liabilities of ANZ Bank New Zealand Limited, Australia and New Zealand Banking Group Limited, or their subsidiaries (together 'ANZ Group'). ANZ Group doesn’t stand behind or guarantee ANZ Investments. Investments in the scheme are subject to investment risk, including possible delays in repayment, and loss of income and principal invested. ANZ Group won’t be liable to you for the capital value or performance of your investment.
Past performance does not indicate future performance, and performance can be negative as well as positive. This material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product.
Investment and administration manager: ANZ New Zealand Investments Limited.
[1] Source: CERT NZ Cyber Security Insight Report Q1 2023