Scam Watch

Be aware of investment scams!

When it comes to financial deals, a client's mantra should always be:
"If it sounds too good to be true, it probably is"

Here we identify the seven all-time biggest investment scams so you can inform and protect yourself.
Check these online sites for current scam updates:

If In doubt, Check It Out

Contact our office, we offer to run a check against current scam warnings on a particular investment scheme for you.

1. Unlicensed investment schemes

Never put money into an investment scheme unless it is offered by a holder of an Australian Financial Services Licence (AFSL). ASIC’s Moneysmart website includes a list of companies that don’t hold and AFSL that have made unsolicited calls to Australian investors offering unbelievable deals.

There’s also a list of fake regulators and exchanges that you should check, particularly if you get an unexpected phone call or email from an organisation you’ve never heard of before.

Many unsolicited investment offers come from overseas based companies. They target Australians because they don’t come under the jurisdiction of ASIC. That means if you send your money to one of these offshore, unlicensed schemes it can be very difficult, if not impossible, to recover.

Even if the organisation’s name does not appear on one of ASIC’s list of companies to avoid, if you’re not familiar with it, do some research. ASIC also has a register of AFS licensees. If the organisation is not listed there, don’t invest.

2. Spruikers and seminars

These get-rich-quick merchants are easier to spot. They usually advertise a free seminar at a big brand venue where they will share their investment success secrets with you. The catch is that although the initial seminar is free, you will find yourself pushed to sign up for extremely expensive courses or software so you can learn the ‘system’ yourself.

The worst spruikers are those pushing speculative property deals which can also involve borrowing large sums of money, perhaps even using your home as security. It can be difficult to walk away from these free seminars without signing up for more, at a super large price. The truth is: the only person coming away rich is the spruiker based on high pressure sales of books, DVDs, software and follow-up courses. Don’t be fooled.

3. Early super release

It is illegal to access your super before you turn 55 unless you can demonstrate genuine hardship so any offer you receive to help you “free up” your super early is likely to be a complete rort. If you go along with the deal you could not only lose your life savings but also end up with a big tax liability.

The scammers usually say they can help you get early access to your super by moving it into a self-managed super fund. As part of the deal they will take a huge commission or they may just end up robbing your entire super nest egg. They may also ask you to sign false release documents that could see you ending up in trouble with the tax office.

Another form of super rort involves the theft of your identity. The culprit uses your identity to empty money out of your current super fund, set up a fake self-managed fund and shifts the money offshore, sometimes all in less than a few days.

4. Pyramid schemes

Old-fashioned pyramid schemes can also be dressed up as investment opportunities. You have to outlay a certain amount of money to “join” the scheme and the only way you can recover your outlay is to sign up more “members”. That’s OK if you’re one of the early people to climb aboard but those who come in last may very well end up losing every cent when the pool of fresh recruits dries up.

Such “get rich quick schemes” come under the watchful eye of the ACCC and you can find out more about them on the ACCC’s scamwatch website.

5. Dodgy business ventures

Offers to become a partner or buy in to a business venture can also be very dodgy, especially if they offer huge earnings for very little effort. Be particularly wary if the offer involves you transferring significant amounts of “start-up” funds to someone else’s bank account.

6. Ponzi schemes

These are usually operated by unlicensed fraudsters and are similar to pyramid schemes. The promoter says the investment is secure but it offers very high returns in the form of regular income or dividend payments (sometimes in excess of 10% per month). The promoter then uses funds raised from early investors to pay a healthy “first dividend”.

Those members are then encouraged to recruit family and friends but eventually the scheme organiser spends the money faster than new members can be recruited and the lucrative income payments stop arriving. Sooner or later you realise your capital has gone. In the past some unlisted and unrated debentures have ended up being very similar to Ponzi schemes so always check that even some legitimate investment schemes are using your money to invest in safe, well-established ventures with low levels of borrowing and little exposure to high-risk, speculative activities such as property development.

7. Outright scams

The list of financial scams is endless and the internet has given scammers easy access to a huge potential pool of victims. Check ATM machines for skimming devices that can extract your card and security information while you use the machine. Then there are the endless attempts to extract your credit card deals so they can be used illegally. Phishing schemes involve the illegal use of your bank account details. The bottom line is – you need to be ever-protective of your financial information and ever-vigilant about who you trust when it comes to investment opportunities.

Information appearing on this website (and via the links provided on this website) is for general information only and should not be taken as constituting advice. While all reasonable care has been taken in preparing the information Watzdorf Financial Planning make no representations that the information is correct, complete, reliable or appropriate to your circumstances. You should obtain independent advice on any specific issues concerning you.