How IFAs can act as trusted confidants in light of rising financial scams

Wealth scams are on the rise, posing a significant threat to your clients’ financial safety.

According to a report from the Actuarial Post, between 2020 and 2023, financial criminals stole more than £2.6 billion through investment fraud.

What’s more, Citizens Advice has found that between January and May 2023, as many as 40 million adults were targeted by scammers.

As an IFA, it is essential to be aware of how advanced financial scams are becoming, as well as knowing how vulnerable your clients may be when faced with fraudulent activity. Our profession has the opportunity to become a trusted source of information and support in the wake of increasing financial crime.

With this in mind, keep reading to learn how IFAs can act as trusted confidants to our clients when faced with high-level scams.

Establish yourself as a trusted source of correct information

One significant reason for the exponential rise in financial scams is the digital age.

With so much financial information available on the internet, combined with the fact that many of your clients may manage their wealth entirely online, this creates the perfect window for opportunistic criminals.

For example, using only their smartphone, your clients are able to:

  • Pay into or start a pension
  • Take out financial protection
  • Invest
  • Move their cash savings to a new account
  • Shop around for mortgage deals
  • Obtain a new loan or credit card.

If they discover a fraudulent “wealth opportunity” while managing their money online, your clients may not be able to tell the difference between real and fake websites. Some scammers even use “deepfake” technology to replicate the branding and wording of big institutions like banks and building societies.

So, one important step to take as an IFA is establishing yourself as a trusted source of correct information.

You can do so by:

  • Letting your clients know that they can contact you for a chat at any time
  • Posting about important financial issues on social media
  • Sending regular email correspondence, such as a newsletter, meaning you remain at the forefront of your clients’ minds even when they are not due for an annual review.

Taking on the role of trusted confidant might mean your clients consult you before making any big financial decisions, such as taking a “pension transfer opportunity” that could be a scam.

Talk to your clients about common fraud red flags

Alongside making sure your clients see you as an approachable expert, discussing common scam red flags could also help to keep their money safe.

These include:

  • Cold-calling. Pension cold-calling became illegal in 2019 (which your clients may not know) and even in other areas of finance, cold-calling is now very unusual.
  • Unsolicited emails. Like cold-calls, financial criminals may often send unsolicited emails offering investment or pension opportunities, or posing as HMRC asking for payment.
  • Promises of high returns over the short term. Investment fraudsters often promise better returns to victims, especially over the short term.
  • Limited contact information. Scammers may use mobile numbers rather than registered office phones, and victims might not be able to call them back (or speak to anyone over the phone if the offer was online).
  • Pressure tactics. Some criminals will pressure their victims into making a transaction, as they say the offer is available “for a limited time only”.

Making these red flags known to your clients, either through written correspondence or by talking to them in person, might help them become savvier when managing their money online.

Be ready to act if a client falls victim to a financial crime

Even with plenty of financial education and the support of an IFA, a client could still fall victim to a scam.

According to Citizens Advice, the top five types of scam experienced in 2023 were:

  1. Parcel delivery scams, in which a criminal claims to be a delivery company and sends a text or email asking for a fee to reschedule a delivery or pay for customs charges.
  2. Banking scams, where fraudsters pose as a bank or building society in an attempt to obtain a person’s details.
  3. Online shopping scams that dupe shoppers into buying items that never arrive.
  4. Investment scams, including get-rich-quick schemes
  5. Tax or government-related scams, in which a criminal claims to be from the government discussing support available for energy bills and asking for personal information including bank details.

If your client contacts you fearing they have lost money to a financial scam, be it a “small” loss or a life-changing amount, it’s important to know which steps to take next.

These could include:

  • Speaking with your client to understand the full details about what happened
  • Encouraging your client to report this to the police
  • Helping them liaise with their bank, building society, pension provider, or ISA provider, which may have its own scam protections in place
  • Consulting FCA regulations for how to proceed with retrieving funds lost in a scam.

Canada Life reports that in 2023, 43% of people managed to regain all of the money stolen in a scam – but 26% never saw their funds again.

While there may be nothing you can do to retrieve capital lost to financial crime, it’s crucial that your clients feel supported when going through an incredibly stressful situation like this.

Your expertise could make all the difference, both emotionally and financially, if your client is a victim of a scam.

Corbel Partners can support you

Being part of an advice network has several benefits, one of which is having a wide range of support if something goes wrong.

If your clients lose money to a financial crime, we can help you support them through this difficult period, no matter the outcome.

To learn more about how we can help IFAs improve their practice, email or call 01925 637891.

Please note

This article is for general information only and does not constitute advice.

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