on February 7, 2023
Today, more than ever, the financial industry is rife with scams. With online transactions and investment tools becoming increasingly prevalent, there are more and more opportunities for scammers to take advantage of the average person. Financial cons and conmen have existed for centuries (Ponzi schemes, anyone?), but they continue to evolve with the times.
It is important to be aware of common types of financial scams and to take steps to protect yourself. This article will discuss five common types of financial scams to avoid.
1. Big Promises
You’ve probably heard advertisements on the radio or received flyers in the mail making big financial promises. “Guaranteed 15% return” or “We promise your portfolio will beat the competition.” Though these bold promises may be enticing, I advise you to exercise caution! More often than not , these strategies are too good to be true and, in the end, you’re left to suffer the fallout.
Avoid investing in any schemes that seem too good to be true and always do your due diligence (e.g., read the fine print or talk to your financial advisor).
2. Phishing Emails
Cyber-criminals are notorious for posing as legitimate financial institutions in an effort to glean personal information and credentials. If you’re contacted via email by a “financial advisor” asking for your account numbers, passwords, or other sensitive information, delete the email and contact the institution directly. Furthermore, be wary of any suspicious links or buttons that appear in an email. When in doubt, you can hover over a hyperlink (do NOT click) to see where it leads.
3. Unproven Investment Opportunities
Call me a traditionalist, but when cryptocurrency and NFTs became all the rage, I was skeptical. These supposed “investment opportunities” were not only unproven, their value was solely based on speculation and the whims of the market. That’s certainly not a recipe for stability and, as it turns out, many of these investments were overly-promoted and were eventually revealed to be fraudulent. It can be okay to allocate a small amount of your assets to new investment avenues, but I would certainly advise against making these types of investments your central strategy. In short, don’t let your curiosity put your finances at risk.
4. Advance Fee Loans
It’s a hard truth, but if you’re ever asked for an up-front payment for a loan you’ve applied for (other than a credit check fee or closing costs), you’re likely being scammed. This is a common tactic used by criminals to swindle unsuspecting victims of their hard-earned money. If a lender is asking for money up-front, that’s a huge red flag, and you should consider it a warning sign to steer clear.
5. Social Media Investment Groups
Social media has become a major platform for scammers to advertise their schemes. If you’re ever invited to join a “secret investment club” or a “surefire way to get rich” through a social media group, run the other way! The truth is, the vast majority of these groups are scams that should be avoided at all costs.
Financial scams come in all shapes and sizes, and unfortunately, they’re becoming increasingly common. By being aware of these five types of scams you can go a long way in protecting yourself. But, ultimately, it’s best to exercise caution and do your research before making any financial decisions. And when in doubt, consult a trusted financial advisor.