How to Spot a Financial Scam

It’s a sad truth that there are still far too many people who lose their hard earned money to either dubious financial strategies, or financial scams and confidence tricksters.

This happens despite the best endeavors of Government watchdog agencies, increasing financial literacy amongst the investing public and higher Financial Planning professional standards amongst industry participants.

Over borrowing to invest has caused much heartache as evidenced by recent examples such as the Storm Financial collapse.

Ongoing investigations by the Australian Securities and Investments Commission and Australian Prudential Regulation Authority into missing millions invested via collapsed fund manager Astarra/Trio Capital has meant many families have been unable to access their life savings for months.

Some financial scams arrive unsolicited such as the famous Nigerian email.

Disturbingly, failed investment strategies are often recommended by trusted advisers.

It’s your money, remain on alert and remember your Grandparent’s warning that if something seems too good to be true, then it usually is.

The following has been taken directly from the Governments ‘How to Spot a Financial Scam’ alert page at

1. It looks real
Scams that catch people often look realistic and are presented professionally. They have attractive documents, a business-like website, and names that sound like reputable companies.

2. Bigger and faster profits than real investments
Scams always offer a higher return than genuine investments. Some offer 20% a year, others go for 300% a year or even more. It’s too good to be true. By comparison, Australian shares are some of the most successful investments, and their value has grown about 7-9% p.a. over the long term.

3. Less risk and less effort than real investments
Most scams say that financial success is easy and risk isn’t a problem. But real wealth demands planning, hard work and guts. Even the best investors make mistakes and have to weather storms like market busts and economic recessions.

4. Something special that genuine investments don’t offer
It could be a ‘secret’ offer, ‘inside information’ or ‘new techniques’ to make you feel like you’ve got an edge over other people. But chances are it’s a fairytale – and it won’t have a happy ending.

5. More urgent than the real thing
Scammers often say ‘don’t miss out’ and ‘act quickly before it’s too late’. They’re really just trying to grab your money before you have a chance to check properly.


 This article is general in nature only and does not constitute or convey specific or professional advice. Formal advice tailored to your specific circumstances should be sought before acting in any of the areas discussed.