How to spot investment scams in the Philippines

 

By Rose de la Cruz

 

Banks and insurance companies have aggressively been promoting VULs and UITFs (variable life insurance and universal life insurance) investment programs to ensure an individual achieves financial freedom (or freedom from worries about money matters) in his lifetime.

 

And a post by Security Bank on Consumer IQ said such mutual funds, VULs, and  UITs even allow you to grow your money without putting in so much time and effort. Ironically, this idea that you could grow your money without micro-managing your investments has opened the door for scams.

 

These scams typically disguise themselves with the promise of easy, guaranteed returns while looking to take advantage of newbie investors. As you explore different opportunities to grow your money, it will be crucial to avoid putting it in the hands of fraudulent—albeit enticing—investment opportunities.

 

The bank identified the following warning signs to look for:

 

1. ‘Quick, easy, and risk-free investments:  If someone promises investments without risk, you are getting scammed. Investing is the discipline of managing risk; the more risk you take on, the higher your potential returns. If you’re offered deals like an absurd 80 percent return in one week, then it’s best to get your cards off the table. This method is called phantom riches and is used to prey on newbie investors looking to instantly double up on their investment.

 

2. More recruits mean better business: One type of fraud takes the shape of networking schemes that rely on the number of recruits introduced into the business. More commonly known as ‘pyramid scams,’ these fraudulent business models use first-hand testimonials by their ‘business partners’ to lure in warm bodies. Once convinced, they will be required to pay an entrance fee usually ranging from P10,000 to as much as P50,000.

 

3. The ‘everyone is doing it so it must be legit’ catchphrase:  One big mistake of new investors is believing successful claims and getting overwhelmed by impressively articulate sales talk. Remember, they’ve done their spiel a thousand times before so it’s bound to sound professional and excellent. Most importantly, a large network/company doesn’t guarantee that it’s legitimate. Be skeptical

 

4. Now you see me, now you don’t:  If you can’t find the investment company online, chances are high that it’s a scam. The secret is to do your own research. Search for the investment company’s registered name online, check with the Philippine Investment Fund Association (PIFA), or get the advice of a credible financial advisor. There’s no such thing as too careful, especially when a lot of money is at stake.

 

5. The hurry while investments last type of talk: Credible investments do not have limited offers. This technique is done by smooth-talking fraudsters looking to cash in a little extra before booting out of the country. They would often rely on urgency, very technical explanations of the investment, and special—limited time—offers.

 

The Security Bank post said that investing is not about becoming rich overnight. It’s about building your portfolio throughout a long period of time and managing risk along the way. Warranted skepticism is valuable when it comes to building your finances. Don’t be afraid to ask the hard question: “Is this too good to be true?”

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