1) It looks real

Scams that catch people often look realistic and are presented professionally. They have attractive documents, a business-like website, and names that sound like reputable companies.

2) Bigger and faster profits than real investments

Scams always offer a higher return than genuine investments. Some offer 20% a year, others go for 300% a year or even more. It’s too good to be true. By comparison, Australian shares are some of the most successful investments, and their value has grown about 7-9% p.a. over the long term. 

3) Less risk and less effort than real investments

Most scams say that financial success is easy and risk isn’t a problem. But real wealth demands planning, hard work and guts. Even the best investors make mistakes and have to weather storms like market busts and economic recessions.

4) Something special that genuine investments don’t offer

It could be a ’secret’ offer, ‘inside information’ or ‘new techniques’ to make you feel like you’ve got an edge over other people. But chances are it’s a fairytale - and it won’t have a happy ending.

5) More urgent than the real thing

Scammers often say ‘don’t miss out’ and ‘act quickly before it’s too late’. They’re really just trying to grab your money before you have a chance to check properly.

One of the simplest, yet most effective scams perpetrated on unsuspecting investors for many years have been Ponzi schemes.In these schemes the promoter promises investors a very high return on their investment and says it is secure.

Part of the money deposited by early investors is then used to pay their first dividend cheques or interest. The victims are more than happy to get high dividends. These schemes only require a few people in their early stages to be successful. The swindler continues paying them dividends for a couple of months until they are more comfortable with their investments, and decide to invest more.

They then begin to urge their friends and relatives to invest as well. Soon, there is a steady flow of funds into the scheme, and the number of investors grows.

If the swindler is disciplined about how much money is left in the account to pay “dividends”, the scam can go on for many years. Theoretically, if the scheme continues to draw in new investors, it could go on indefinitely. In practice such schemes usually fall over because the promoter starts to spend the money too quickly, or the pool of investors starts to dry up.

If you’re under the age of 55 watch out for financial advisers offering to quickly and easily arrange for your preserved superannuation benefits to be paid out in cash.

‘Some cases we’ve taken action against have involved the theft by unscrupulous advisers of all or part of the consumers’ superannuation benefits’, said ASIC’s Executive Director of Consumer Protection.

‘In other cases we’ve seen financial advisers take large fees before forwarding the remainder of the super benefit to the client. You should be aware that you can only gain early access to your preserved super benefits in restricted circumstances’, our director said.

‘In addition to the risk of losing your money, you may suffer taxation complications as a result of these fraudulent payments. Fraudulent early access also means that you no longer have these superannuation benefits available to you when you retire.

Advisers have used a variety of methods to deceive the consumer’s superannuation fund into paying out these benefits directly to the adviser in cash, rather than leaving the money in the fund or paying directly to another eligible superannuation fund.

‘We are concerned that people experiencing financial difficulties have been targeted by some advisers. It is possible in limited circumstances for money to be released early on the grounds of severe financial hardship, but you should talk directly with your fund in such cases’, he said.

Under the Superannuation Industry (Supervision) Act, the preserved component of your superannuation benefits cannot be paid out in cash until you turn 65, retire from the workforce after age 55 or meet certain other limited criteria.