It’s a sad truth that where there’s money, there is usually a scam.
With millions of people stuck at home last year, investing was on the up. Lots of workers had more spare cash, not having spent it on commuting, holidays or any other activity that involves leaving the house. Add to that a meteoric rise in meme stocks and the likes of Bitcoin, and you have the recipe for an investing frenzy. Which should be great news. But unfortunately, it is also a perfect storm for fraudsters.
Figures from Action Fraud show £63 million was lost to victims of fraud through social media alone over the past year. Another £2.2 million was lost to pension scams in the first five months of the year, and £1 million to ticket scams, taking advantage of people’s desperation to get out of the house and do things again.
The Financial Conduct Authority said this week it is stepping up its scam awareness efforts. Its business plan for the coming year includes a campaign on scams and high-risk investments.
And while that’s a very noble intention, I’m not sure how much good it’s going to do. Because the main hurdle we face in tackling fraud is this mindset: “It will never happen to me.”
We’ve all received those ludicrous texts and emails from long-lost royal relatives offering a once-in-a-lifetime business opportunity, riddled with spelling mistakes, or claiming to be from Boris Johnson or the Queen, asking for an immediate transfer of cash. So far-fetched are these scams, so laughable are these attempts, that we are reassured into thinking that they will all be so easy to spot.
Scams Get More Sophisticated
They are not. And as our lives increasingly move online and we trust more and more to emails and texts and apps, we become more and more susceptible to these scams. How many people have received a parcel fraud attempt over the past year? As I’ve ordered more online through lockdown and become used to regular text updates from delivery companies, I sometimes find it hard to know which ones are real.
And what about the elderly, who have been home alone for the past year, and targeted by unscrupulous fraudsters, who have perfected the art of panicking and confusing their victims over the phone? I worry about those who have been left unprotected in this pandemic, with no nearby friends or family able to help.
Fraudsters are experts in their art, and constantly adapting to find the most effective way to part people from their hard-earned savings. A flashy advertising campaign from the regulator is not going to solve that - instead, the ad campaign needs to start with you. Fraudsters rely on victims suffering in silence and shame. We need to start talking about fraud, it's the only we'll realise how endemic the problem is. So next time you get a dodgy text or click a link you shouldn't have, whether you realise in time or not, share the experience - text or WhatsApp your friends, tweet about it or post it on Facebook, and make sure you report it to Action Fraud. The only people who should feel shame are the scammer.
Keep a Close Eye on the Data
There are plenty of tools that investors can use to gauge sentiment. A look at our monthly flows will tell you where others are putting their money, our monthly UK barometer shows how markets are behaving, and this excellent equity outlook for Q3 from our analyst team can tell you what the experts are thinking.
Equally telling is the FCA's daily updated register of short positions. Sure, it's not the most optimistic of spreadsheets - it tells you which stocks investors are betting against - but it can be pretty enlightening.
This month's look at the most shorted stocks on the FTSE indicates that there are some lockdown trends that investors don't see reversing. Cineworld (CINE), for example, is top of the pile despite its shares being up more than 30% this year and the chains now open for business once more. Has 15 months of sitting on the sofa bingeing on-demand content made the cinema experience obsolete? Shopper centre operator Hammerson (HMSO) finds itself on the list too, highlighting again that the travails of the UK high street were entrenched even before the pandemic.
Flows, outlooks and short registers are not enough in and of themselves to make an investment decision, but they are an interesting and helpful tool in an investment armoury. Particularly at a time when sentiment seems to be a major influencer on market moves.
