When it comes to pension scams, the pandemic has basically supersized all the behavioural issues that the vast majority of pension savers face. In most cases, there is a lack of financial sophistication and understanding of basic risk. The utility of financial advice means investors have a professional looking after their affairs and should be able to spot scams in a way that a regular saver won’t. But that doesn’t mean our members aren’t also vulnerable to fraudulent schemes.
One of the other things we’ve seen over the last couple of months is the rise of cloning scams. Some of our larger firms, especially – usually wealth managers – are having their websites cloned. Facsimiles of their sites are appearing with addresses that look very similar to their real address, or letterheads are being sent out to people using their logo, for example.
These scammers purport to give specific investment opportunities that are generally too good to be true. One example was a site purporting to be a national wealth manager, offering supermarket bonds to clients allegedly underwritten by this wealth manager. It was obviously completely fraudulent.
While people are reasonably well protected from scams when they are being financially advised by a member of a national wealth manager, it doesn’t mean that our firms are completely protected. Fraudsters are basically using their brands to undertake criminal activity. We need more effective regulation around marketing these schemes online to mitigate these risks.
Increasingly, advisers see themselves as financial life coaches. In that respect, the primary role of an adviser is to break down the information asymmetry between client and financial services provider, to enable them to understand what the product is and how the funds are invested.
We tell them: “this is how it will impact you, this is what you can reasonably expect to get within a certain timeframe”. This should all be done in a way that isn’t sugar-coated with the sort of sales bias that fraudulent or overly optimistic investment tends to give. This ensures clients are realistic about what they’re going to get and are provided with a level of confidence about both the nature of the investment and the long-term impact on them.
Read more from Simon Harrington in the ‘Combating pension scams’ article on pages 52-53 of the summer 2021 issue of Chartered Banker magazine.