The role of the adviser in the world of scams

Discussion between advisor and patient

For adviser use only


Have you received a call to tell you about a phenomenal investment opportunity, with a guaranteed return? Perhaps the person on the end of the phone has offered to review your pension free of charge? Or maybe they can simply give you early access to your pension before age of 55? 

Of course, as a financial adviser you’d cut the call short immediately, but would your clients do the same? Fraudsters can be articulate and financially knowledgeable, with credible websites, testimonials and materials that are hard to distinguish from the real thing.  Even your most financially astute clients could be lured in. 

At Aegon, we’re doing everything we can to make consumers aware of the problem, however, this is not a battle that can be won alone.  Advisers are in a key position to alert clients to the danger of fraud, including scam warning signs, tricks and pitfalls. Together, advisers, employers and providers can continue to raise awareness and put pressure on the government to make further changes to legislation.

Measures, first announced in August, could seriously deter the activities of scammers and raise awareness of the dangers of fraud among the general public. The longer the government prevaricates, the greater the danger savers will be targeted by fraudsters.

The scale of the problem

There’s no doubt that scams are on the increase.  Government figures indicate that £43 million has been unlawfully obtained by scammers since April 2014, with those targeted having lost an average of nearly £15,000, as scammers try to encourage savers to part with their money with false promises of unique low-risk, high-return investment opportunities.

Citizens Advice has calculate that 10.9 million consumers have received unsolicited contact about their pension alone in 2016. This includes 2.4 million consumers aged 55-64. 

The scale of the problem is being taken seriously - the government is in the process of planning new measures to protect savers.  The question is, will they be enough?

Taking action

Measures under discussion include a ban on cold calling in relation to pensions, including emails and text messages, a tightening of HM Revenue & Customs (HMRC) rules to stop scammers opening fraudulent pension schemes and tougher actions to help prevent the transfer of money from occupational pension schemes into fraudulent ones.

However, the Department of Work and Pensions (DWP) has said the legislation would be tabled"when parliamentary time allows", so it could be many months before the rules come in, but action is needed now – in the first five months of 2017 almost £5 million was obtained by pension scammers.

The government has made some progress by introducing draft legislation to stop scammers opening fraudulent schemes. From 6 April 2018, all new occupational schemes will have to have a sponsoring company that is an active company. This requirement will also apply to existing registered schemes and HMRC will have the power to de-register any schemes with a dormant employer.    

Spotting the hallmarks of a scam

Often, you’ll spot potential scams before your clients – you’re far more likely to spot the hallmarks, such as illiquid, unregulated, unusual high risk investments, sometimes offering high guaranteed returns. 

The indications of a scam may include:

  • a free pension review;
  • the promise of guaranteed returns on their investment;
  • low tax / tax-free rates, including tax-free lump sums;
  • exotic sounding and/or overseas investments, and
  • pressure to sign up quickly to avoid missing out.

Armed with the right knowledge, your clients could identify these themselves, and where relevant, alert you and the authorities.

How can your clients avoid pension scammers?

The foolproof way of avoiding cold callers is to avoid answering the phone, but that’s not very practical, so how can your clients avoid falling foul of potential scammers?

Emphasise to them how important it is to ignore and report unsolicited calls. Remind them that promises of unrealistic returns are likely to be from fraudsters. On your websites, have a signpost to the FCA’s scamsmart webpages.  

Tell your clients to check if a firm is authorised by the FCA. If they’re not, it’s probably a scam.  Check the FCA’s Financial Services Register to see if a firm or individual is authorised or registered with the FCA.  If there are no contact details on the Register or if the firm claims they’re out of date, call the FCA Consumer Helpline on 0800 111 6768.

It’s worth pointing out to clients that if they use an unauthorised firm, they won’t have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong – and they’re unlikely to get their money back.

The influence of introducers

Advisers must also be alert when using introducers to get business. The FCA is concerned at the increase in the number of cases in which the introducer has an inappropriate influence on how the authorised firm carries out its business, in particular where the introducer influences the final investment choice.

The FCA has found that some authorised firms do not have adequate input or control over the advice they are ultimately responsible for giving to customers. This has been particularly evident in relation to advice on switching and transfer/conversion of pension benefits, including advice involving movement of pension pots to unregulated, high risk, illiquid products, whether they are based in the UK or overseas.

As an industry, it’s key that we continue to increase awareness and work together to protect client savings.