Net losses: Internet-based investing is opening doors for scams

Investment markets are tough enough without losing money to scams.

Be very cautious with unsolicited investment offers.

Australians over the age of 55 have lost more than $14m over the past six months in investment scams according to Scamwatch, a website run by the Australian Competition & Consumer Commission (ACCC).

Delia Rickard, deputy chair ACCC, says: “When combining our data with bank data, over $126m has been lost to investment scams over the past 12 months, and a lot of scams in addition to this are not reported.”

The typical investment scam is an out of the blue phone call offering some investment opportunity with great returns and low risk.

Historically, they would send a glossy prospectus in the mail however the scams have evolved and today they direct the investor to a refined website that appears to be legitimate.

The next step is they give an online account access which shows the investment growing rapidly in value. When the victim wants to take their original deposit and profits out, the scammers happily send all the money out to an external bank account.

The investor thinks this is terrific and validates the legitimacy of the investment given they can withdraw their cash plus profits at any time they like.

With the investor now completely sucked in, they open their wallet and deposit large sums of money into the scam.

Not only this, they start to tell their friends and family and whoever will listen about this amazing investment that everyone should explore.

Later when the investor tries to take the larger investments and profits out, the jig is up: A stream of excuses flow from the scammer until finally the truth becomes apparent.

Rickard says: “Be very cautious with unsolicited investment offers. Ask yourself why are they contacting me and why would something that is going to make so much money so easily not being used by everyone. Seek advice from an ASIC licenced financial planner and speak with others before investing.”

In addition to having your own guard up, check with the professionals you deal with that they have processes in place to protect against cybercrime.

Protect your passwords, do not open suspicious emails, do not let anyone remotely connect to your computer, do not entertain phone-based or online investment opportunities and keep your operating system updated and protected with antivirus software.

It is a tough enough year for retirees with falling equity markets and term deposit rates.

Losing more money through investment scams can be a crushing blow with the money usually never recovered.

James Gerrard is principal and director of Sydney financial planning firm www.financialadvisor.com.au