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How To Recognize Financial Scams

Investing your money wisely can help it grow; however, if you fall victim to a scam, you'll lose everything you put into the investment. In order to protect yourself from this, you need to learn the signs of a probable scam

No Surety Bond

If a financial advisor or investment company doesn't have a surety bond, you need to be more careful in dealing with them. Surety bonds are a type of insurance guaranteeing that the company will do what it says it will do. If a company doesn't possess this type of insurance, it may not be as legitimate as a company that does. Companies have to meet certain criteria to get this type of bond; which usually involves going through a verification process.

Emphasis on Recruitment Rather Than Sales

One common type of investment fraud is called a pyramid scheme. Pyramid schemes promise you a high return on your investment, but your return is based on how many other people you can get to invest in the product or service rather than on how well the product itself does in the market. This type of investment allows the originators to get very rich, but investors generally don't make very much. Success with this type of scheme is logically impossible due to the fact that there must always be newcomers joining to bring in revenue. In order to make the kinds of profits scammers promise, you'd have to recruit more investors into the project than are currently alive today. Usually another giveaway is if the person pitching you the idea focuses on “success” and “independence” rather than the actual business model.

Promise of Easy Money Right Away

Real investments take time to mature, while fake ones promise you the ability to make large sums of money almost immediately. If a business promises you lots of money quickly, especially if representatives pressure you to make an investment immediately rather than thinking it over, you are probably dealing with a scam.

You Have To Give Personal Information Upfront

If a business asks for your personal or account information immediately, you need to be cautious. Scammers are usually in a hurry to get your money or your personal information so that they can commit identity theft. Legitimate investment opportunities allow you to invest without immediately requiring you to share your bank account details. This is especially true if the investor asks you to share these details via email.

You Can't Find Information About The Company

Most legitimate businesses offer contact information upfront; they want investors and customers to contact them. Scammers tend to hide their contact info even if they have an official looking website. In addition, scammers often try to hide their presence online. If you can't find any information about an investment opportunity via a quick Google search, you should be suspicious of that opportunity. Similarly, if you can't find any information about a financial broker by searching broker databases, that broker is probably not legitimate.

Matt Doyle is an expert in surety bonds and when he is not writing you can find him traveling the world one random place at a time.

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