26 Jul 2018

Your Money with Mary Holm: Avoiding scams

From Afternoons, 2:26 pm on 26 July 2018

Everybody, can be victims of money making or investment scams, fraud, or bad deals. 

This week on Your Money with Mary Holm, she offers advice and information on warning signs and some known scams. 

She tells Afternoons’ Jesse Mulligan research has shown that the more financially sophisticated a person is, the more likely scams are to succeed against them. 

She says investment scammers are more likely to take in older, wealthier, risk-taking men, preying on their overconfidence, while women are more likely to be caught out by recovery fraud - scammers offering to help get your money back when you've already been targeted by fraud. 

Mary’s top advice

Mary Holm Photo: RNZ/Cole Eastham-Farrelly

“If I could give one piece of advice above all else, it’s don’t get into any kind of investment where you don’t understand how they generated the return,” Mary says. 

“If they’re telling you ‘oh look it’s too complicated, but you know, 10 percent, 12 percent, 100 percent, whatever they’re telling you … if you can’t see where the returns are coming from don’t go into it.” 

She said the Ministry of Business, Innovation and Employment’s ‘scamwatch’ website also has a lot of useful advice. 

“They ask you to report scams, they give you help in identifying if it is a scam, they give you help if you’ve been scammed, there’s a whole lot on that website.” 

Of course, it’s always worth doing your own research. 

credit cards on a keyboard

If a deal looks too good to be true, it probably is. Photo: RNZ / Diego Opatowski

“I really recommend to people that you just google the name of the company - or whatever you’re thinking of buying that you’re a little bit worried about - and the word ‘scam’ and the word ‘fraud’ and the word ‘review’ and see what comes up.”

“Don’t be comforted by good stuff you see, but do be warned by bad stuff you see.” 

Another option if you’re unsure is to check with your lawyer or accountant, and if it looks dodgy, just walk away. 

“It’s really rare that if you walk away that six months later you find yourself wishing you hadn’t, it’s far more common the opposite.” 

Known scams and warning signs

1. Pressure to commit quickly

"That isn’t always a scam, it might just be someone selling you something and charging you way too much for it.

"You get it all the time, and I just say to people 'just never, ever be pressured to buy something'. 

"It’s really rare that if you walk away that six months later you find yourself wishing you hadn’t. It’s far more common the opposite." 

2. A stranger approaches 

“By email, over the phone, in the mall or whatever … ask yourself why are they doing that, it never ends up being good I think.” 

Close-up of hand knocking on the door

Strangers offering a deal out of the blue are inherently suspicious.  Photo: 123RF

3. Free or cheap seminars 

“A way to get you through the door, and then they start giving you the sales pitch … you’ve always got to be asking why are people doing these things for you." 

4. You’ve won a prize and you didn’t enter

“That’s old now, but I suspect it still happens. It used to come in the snail mail." 

5. Keep the investment secret, or private

“That’s a sign they don’t want you checking with friends or other people you might want to check it with. 

“They’ll say ‘oh, no, no, it’s got to be kept secret', that’s a technique that’s used." 

6. Testimonials, or ads in reputable media publications or radio

“We all know that if there’s something online or in writing or whatever that says ‘this is the best thing that’s ever happened to me, signed Bill Bloggs, butcher of Papatoetoe’, that those aren’t real people.” 

“But also people will say ‘I saw an ad in the Herald or an ad in the Dom Post or something and they’re good solid publications, they wouldn’t run a scamster’s ad’. 

“I’m sure they wouldn’t knowingly, but they don’t have the resources to check out everybody who wants to advertise.” 

7. ‘Approved’ by a government agency or Consumer New Zealand

“Neither government agencies nor Consumer New Zealand give approvals to something that looks like an investment scam." 

8. ‘Check with your lawyer or accountant’ 

"What they’re hoping of course is that by saying that you’ll think ‘oh if they said that it must be on the up and up, it must be fine’.

"You don’t want to go see your lawyer or your accountant because they’ll charge you fees to do it so you just don’t bother … I suggest you really should bother, probably you should just walk away from the thing anyway." 

9. Guaranteeing rental income

"The people promoting it say ‘now, Jesse if you buy this apartment we reckon you’ll get x-thousand dollars a month rent for it, and what’s more we’ll guarantee you get that. 

"They guarantee it for three years and so you get the guaranteed amount but then after three years the guarantee’s over and suddenly you find that it’s only renting for about half what the guarantee was. 

Sotheby's says an increasing interest in luxury properties from overseas buyers.

Guarantees of rental incomes may be hiding the true, much lower, value of the property.  Photo: 123RF

"In other words the promoters have made you think it’s a much better investment than it is and so you’ve paid much more than you should have for it.

"So they’ve made a huge profit up front by you overpaying and they’ve used a little bit of that to supplement your rent going through." 

10. Creating websites or fake government authorities

"Let’s say it’s the UK financial lookout agency or something like that, it’s got a credible sounding name and when you go on it it looks like a legitimate website. 

"On their own website it says ‘we are approved by such and such agency’."