This week I am delighted to share a second set of my top tips for avoiding investment scams.

In a year where pandemic uncertainty marred the UK’s economic and market outlook, scammers preyed on the doubts felt by many investors and secured payments by posing as legitimate investment firms. It is therefore more important than ever to be cautious and to follow sensible due diligence before making any decisions.

Here are some additional tips to ensure you don’t become an unwitting victim of these fraudsters.

4 - Check qualifications and track records

Advisers have to be qualified at Level 4 or above of the Qualifications and Credit Framework (equivalent to the first year of a university degree). They also need to obtain an annual Statement of Professional Standing (SPS), which is awarded by the FCA. You should check whether your adviser or investment manager has these. Some advisers concentrate on particular types of individual, either with a specific level of wealth, or specific circumstances. An adviser who has clients similar to you on their books is likely to understand your situation and goals, and may have specific expertise in the types of investments suitable for you.

Longer performance track records permit investors to evaluate the performance of a fund or manager through a complete cycle. This helps investors to understand how well (or poorly) the manager has performed during different market conditions. Be sure to ask for performance records net of fees so you can get an idea of the actual returns investors have received over these periods.

5 - Ask about risk management and liquidity

While an adviser must tailor your investments to your level of risk tolerance, a financial adviser who shares your views on ethics, risk and goal setting may be easier to work with. Be sure to ask about the liquidity (defined as the time it takes for you to access the money if you need it at short notice) of your investments. Also make sure that you have control over the levels of contributions that you may decide to make to your investment portfolios, i.e., that you are not tied into making high levels of monthly contributions which you then cannot stop should your circumstances change.

6 - Examine the costs

It is important to understand what fees and charges you will pay for advice/investments and when you will be expected to pay. Start by finding out if there is a fee for an initial consultation. You should have the option to pay a one-off fee or you may pay a regular continual fee if the advice is ongoing. Advisers cannot be paid commission from your investment by product providers and will have to tell you upfront how much their service costs. Make sure that any information you receive on performance is NET of fees, i.e., a reflection of the true amount you receive after fees have been paid.

If you cannot wait until the next post, you can view a full list of these tips as they have been published in What Investment magazine.

Important information

The contents of this article are for information purposes only and do not constitute advice or a personal recommendation. Investors are advised to seek professional advice before entering into any investment decisions. Please also note the value of investments and the income you get from them may fall as well as rise and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future. performance.