FCA warns low interest rates increase investment scam risks

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Low interest rates are driving more investors to seek higher returns in unregulated investment schemes, increasing their chances of being scammed, the FCA has found.

New research from the FCA,which is part of the regulator’s Scam Smart campaign, found almost half of people aged over-55 investing in unregulated products do so without seeking professional advice.

The study surveyed 2,300 UK residents and found 41 per cent of over-55s had moved money out of savings into investments in a bid to get a better return.

It says the current low interest rates is one of the key reasons investors are looking at a range of unfamiliar types of investment products, with more than a quarter of over 55s falling victim to fraud being scammed via an unauthorised firm selling unregulated products.

The figures show no sign of falling, as 23 per cent of those questioned say they are considering investing in unfamiliar types of investments in the future.

Those considering investing in unregulated products in the next 12 months say they would invest an average of more than £4,000, with land, wine and art listed as popular investment choices.

Of those surveyed, 13 per cent were unaware unregulated products bought through an unauthorised firm offered no protection from the Financial Ombudsman Service or the Financial Services Compensation Scheme.

Nearly half invest in unregulated products without getting professional advice or checking the FCA’s warning list.

FCA enforcement director Mark Steward says: ‘You don’t need to be gullible to lose money to a scam or fraud. Fraudsters target financially sophisticated people too, who often don’t like to ask what might sound like silly or basic questions.

“Our research found that 60 per cent of those that have experienced investment fraud have not reported it, so the problem could be greater than we know and by reporting it you are helping us to protect others.”

Cold-calling is also an issue for over-55s with those being contacted by firms they had not heard of reporting a 40 per cent increase in unsolicited contact.

One-third of retirees reported being contacted by a firm offering investments in the past 12 months with 37 per cent being contacted as many as three times. Just under half of those who experienced investment fraud made their investment following unsolicited contact.