If you are aged over 50, male, highly educated, financially literate and manage your own super, beware. You’re at a higher risk of being the target (and victim) of organised investment fraud.
This isn’t necessarily because your demographic is particularly gullible. Rather, it’s because you’re more likely to control higher levels of wealth, perhaps as the trustee of a self-managed super fund (SMSF); you’re accustomed to making financial decisions; and you’re actively looking for attractive investment opportunities. What scammer wouldn’t want to target you?
And even with so much growing public awareness, investment scams increased by 32% in 2021 over the previous year! More than $177 million dollars were lost via clever investment scams, with males accounting for $118.4 million of that staggering figure.
Scams take many forms but when it comes to superannuation, two stand out:
- fraudulent investment schemes, and
- schemes offering early access to superannuation.
Either way, the result can be a major financial loss and dreams destroyed.
One clear warning of a scam is an unsolicited approach. Someone contacts you, usually by phone or email, offering an investment that is ‘both safe and delivering high returns’. This person will often know a lot about you, reciting accurate personal details they claim you provided in a questionnaire you completed earlier. Their story is supported by an apparently authentic website and, enticed by the attractive returns and smooth sales talk, you make an initial investment. At the beginning you receive statements showing your investment is growing steadily prompting you to add further funds. Then things go silent. Their phone number is disconnected, emails bounce and the website disappears, along with any hope of recovering your funds. Your stomach lurches. A cold sweat saturates you. You’ve been scammed.
Wonderful as modern technology is, it makes it easier for fraudsters to appear legitimate and transfer money in an instant. They close down one operation and set up another with ease. It doesn’t help that we give away much of our personal information, and what isn’t available for free can often be purchased by criminals.
The other major scam that lures many who need money quickly is the promise of early access to superannuation. This is how it works.
Bob’s superannuation is just sitting there, the solution to his financial problems if only he could access it.
He searches the internet for options and an advertisement promising early access to super pops up. This puts Bob in touch with a ‘specialist’ who helps him set up a SMSF, telling him that as the fund trustee he will be able to get hold of his super money. Bob signs the paperwork to set up the fund and rollover his super, but the money doesn’t turn up where it should. Eventually Bob discovers that his retirement savings were transferred to a bank account controlled by the scammer then moved overseas.
Not only has he lost the lot, Bob now faces a big tax bill for accessing his super prematurely. The scammers didn’t tell him that early access to super is only available:
- in cases of incapacity,
- to pay for medical treatment if seriously ill,
- if in severe financial hardship and can’t meet immediate living expenses, or
- if terminally ill.
Protection is the best cure
A few simple precautions can help protect your super (and other savings) from scammers.
- Hang up on unsolicited phone calls and delete suspicious emails.
- Take care when sharing personal information.
- Visit scamwatch.gov.au for updates on scams that are doing the rounds.
- If you suspect a scam report it to Scamwatch, even if you haven’t lost any money.
- Seek advice from a licensed adviser. Legitimate advisers and investment managers appear on ASIC’s list of Australian Financial Service Licence holders.
- And beware of dating and romance schemes. They are more common than fraudulent investment schemes, result in bigger financial losses, and are targeted at the same demographic!