Smart Investor Malaysia

Beware of Investment Scams and Financial Gurus

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Australians lost AU$158mil to investment scams in the first quarter of 2022. Malaysians have suffered the same fate with more than RM2bil lost through scams since 2017. The figure is potentially higher since there were many cases that have not been reported.

V. Thanga Velu @ VP Thanga, Executive Director and a Financial Planner at Blueprint Planning Sdn Bhd shares that most of the scam’s victims wanted to achieve their shortfall with the highest return. Besides, scammers are now getting smarter and more creative blending in with the people.

We seldom conduct our own research on whether the investment is legitimate. The other thing that Thanga emphasizes is that the government should impose severe punishments on the scammers. For example, longer jail terms and the seizure of their assets. 

Normal people without a finance or investment background may not know how to classify or identify whether an investment is a scam. 

“Legitimate investments tend to have lower returns and more paperwork such as Know Your Client (KYC) or fact findings to participate in the investment, which may not be attractive and troublesome to some people. If an investment is convenient, provides high returns and no questionnaires are needed, think hard, think long before making that decision as it might just be another scam,” Desmond Foo Wai Kheong, Practice Director of UOB Kay Hian Wealth Advisors Sdn Bhd explains. 

As a rule of thumb, if it is too good to be true, you should consider getting a second opinion before investing your hard earned money. 

With the rise of social media, a lot of financial gurus and influencers are now giving out tips. Some of them are legit, while some may take advantage of their followers. There were a few social media investment scam cases that were reported. 

But how do the public filter all of the information given by the gurus or shared by the influencers so that they won’t fall in the trap?

Nick Lim, a Licensed Financial Planner at I-MAX Financial Sdn Bhd shares that we need to assess the person dispensing the financial advice whether they are qualified. Check this person’s track record and ensure that verifiable facts support everything being shared. 

Senior Vulnerability

investment

In a survey led by the International Organization for Securities Commissions (IOSCO) which represents more than 150 countries’ securities regulators including Malaysia, it found that the senior investors in particular face greater risk of becoming victims of fraud, being misled or taken advantage of.

The 2018 survey which focussed on seniors, defined as those in or nearing retirement, highlighted the rising financial fraud on the elderly across the globe.

As investors age, they may face new challenges such as cognitive impairment due to health and age reasons as well as mental health issues arising from greater social isolation. For some senior investors, these challenges are compounded by a background of limited education and financial literacy – all of which can affect their judgement and decision-making capacity when it comes to investments. 

According to the Securities Commission, this is already apparent in Malaysia – senior citizens are often targets of various syndicates, ranging from phone scams and sweepstakes to more complex scams which involve impersonation of figures of authority. Most scams or fraud activities target the life savings of these senior citizens, regardless of net worth, and take advantage of their vulnerabilities.

The growth in digitisation has also exposed vulnerabilities among investors who lack the knowledge to protect themselves in the digital age.

Beware if It’s Too Good To Be True

The reason that most of us fall prey to scams is due to us being gullible to get rich quick and forget that investment is a long term game.

Some of the more popular scams are the ones that promote non-existent investment schemes that promise high returns with little or no risk within a short span of time. Have you seen an ad that says, “Invest RM1,000 and get RM10,000 within 24 hours”?

Ask yourself, is it too good to be true? If it is, then you should be very careful and avoid it at all costs.

Scammers have also been known to use fake certificates, invoices and payment receipts from authorities such as the Securities Commission Malaysia (SC), Companies Commission of Malaysia (CCM), Bank Negara Malaysia (BNM), and Inland Revenue Board of Malaysia (LHDN). We tend to feel safe if it is endorsed by the authorities, and wouldn’t question them on the legitimacy of the documents.

There is also a rise in clone firm scams, where clone firms pose as legitimate entities by using names, logos, credentials, website and other details of legitimate entities to promote bogus investment schemes. At a glance, it looks very similar between the two. If we are not careful, we will think that it’s the real deal.

Always take some time to research any financial tips, to evaluate if that tool applies to oneself. Keep this in mind, we are the decision-maker and there will be nobody else to blame but ourselves if things don’t turn out well. Ultimately it is always advisable to deal with a licensed personnel.

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