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Scam victims reluctant to invest again

24 November 2020

Quilter has called on the Government to crack down on investment scams after its research revealed that investors who fall victim to scams are reluctant to invest again. 

The research found that as many as seven in ten people who have fallen victim to a scam would avoid investing again, which Quilter warned could have a detrimental impact on their future financial wellbeing.

Analysis by the wealth management group showed that leaving £10,000 in a cash ISA between 2010 and 2019 would have returned 12% compared with 20% if this sum was invested in the FTSE All Share index and 131% if invested in the MSCI World Index.

Quilter’s research comes amid a growing number of scams driven by the Covid-19 pandemic. So far this year, the FCA has issued 1,031 scam warnings involving individual attempts to defraud customers, an increase of 80% on 2019 figures and up 301% on the amount of warnings published in 2015.

Matt Burton, chief risk officer, Quilter, warned that without government intervention to tackle scams, the current period of economic uncertainty coupled with historically low interest rates could create “a golden age of investment scams.” Quilter has called on the Government to broaden the scope of its forthcoming Online Harms legislation to include financial scams, which would ensure that search engines face a legally enforceable duty to protect users when they search for investment products online.

Burton said: “It’s unsurprising that once bitten, investors are twice shy as the modus operandi of investment scammers is to build a relationship with their victims before betraying their trust to steal their hard-earned savings.

“Unlike the tightly regulated environment of print and broadcast, the internet remains a wild west in which scammers have free rein to use paid adverts to promote fake investment products to unsuspecting internet users searching for the best way to use their money. The regulator is powerless to intervene to protect consumers and can only promote their own adverts warning consumers of the dangers of investment propositions received on search engines.

“This is why Quilter has called on the government to include financial scams within scope of the Online Harms legislation due to be introduced to Parliament next year. In doing so, search engines and social media companies will face a legally enforceable duty to remove suspected scam adverts immediately when notified, and will be required to improve their due diligence process so that it becomes much harder for scammers to market investment products using paid adverts.”

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