Discover essential tips to protect yourself from financial scams in South Africa, featuring expert advice on identifying red flags and the importance of consulting a qualified financial adviser. File photo.
As 2025 has set in and South Africans find their feet after ‘Januworry’, financial scams remain a threat. The 2024 Identity Fraud Report noted fraud rates in South Africa soared by more than 300%. In fact, in the first half of 2024, nearly 5% of all attempted digital transactions in South Africa were suspected of fraud.
There are certain industries rife with fraud and scams, and the financial services industry is unfortunately one of those. From simple scams offering easy credit at sky-high interest rates to property syndications gone wrong and even reputable companies finding their downfall due to dishonesty and greed, all people are potential victims when it comes to cunning scammers.
Sharon Hamman, senior legal adviser at Momentum, says South Africans have no choice but to be vigilant and make more informed decisions. “Scammers have a million tricks up their sleeves to take advantage of you in your ‘unique’ situation. Whether you are well versed in financial matters or not, you need the right advice.”
Always look for the red flags
Hamman says the public should be alert to red flags such as easy access to loans during times of financial pressure, investments promising unusually high returns, pressure to act quickly, or dealing with ‘ghosts’ where credentials cannot be verified. "If an offer seems too good to be true, it probably is," warns Hamman.
She explains scammers often present themselves as trustworthy, using charm and persuasion to convince you to make quick decisions. Some are very industrious, creating a false persona that seems credible and trustworthy. “The tactics are no different from any other scammer. They can be convincing and con you out of your life savings in a matter of an hour. That’s why it’s crucial to take a step back and seek professional financial advice before deciding to act on any ‘too good to be true’ offers.”
“Don’t trust anyone who boasts about a great opportunity – their tactic is to wow you with their greatness and promises and then put you under pressure to make a decision. There is no shortcut to wealth creation, especially in a cost-of-living crisis. Don’t be swayed otherwise,” says Hamman.
Don’t get personal
Sharing personal details online can be as risky as confiding in a stranger. Hamman warns consumers to never disclose sensitive information unless they are certain they are dealing with a legitimate entity. If in doubt, her advice is to always verify requests by doing your own research, finding the person or business online, and contacting the organisation directly.
"Your bank will never ask for your ATM PIN, credit card number, CVV, or passwords," says Hamman. "If someone is requesting these details, it's a red flag. Don't be fooled."
There is no substitute for the right advice
Hamman says engaging with a qualified, registered financial adviser is crucial for navigating today's financial landscape.
"Professional advice not only guides clients toward sound financial decisions but also significantly reduces the likelihood of falling victim to financial scams," says Hamman. “Advisers can help assess the legitimacy of investment opportunities or instructions from the bank and steer you away from potentially devastating pitfalls.”
Financial advisers are governed by the Financial Advisory and Intermediary Services Act (FAIS) and as a result, they have to meet certain minimum requirements before being registered as a financial adviser. This Act also imposes certain duties and responsibilities upon financial advisers to ensure that they provide sound and appropriate advice. One of the duties includes following a due diligence process when considering a new investment or product, to confirm it is legitimate and to mitigate the risks to their clients. As a result, a financial adviser is well-equipped to steer you in the right direction.
Build a relationship with a financial adviser
Hamman stresses the importance of having a trusted financial adviser who can help you navigate opportunities and challenges. “A financial adviser is not just someone to consult in times of uncertainty, but a partner in making well-informed decisions about your finances. It is a long-term relationship built on trust – it can be compared to a relationship with your doctor, the one taking care of your physical health and the other, of your financial wellness.
Finding a qualified, registered financial adviser requires time and research. Hamman shares that there are various options when looking for an adviser, from independent financial advisers, adviser networks, insurers, and banks with in-house financial advisers. You should confirm whether the financial adviser in question is registered as a financial service provider in terms of FAIS or acting as a representative of one, requesting their credentials and a short biography to confirm their qualifications and experience.
When it comes to financial decisions, she advises against making hasty decisions without consulting an expert. “A financial adviser can offer a second opinion on investment opportunities and help you see past the pressure tactics used by fraudsters,” says Hamman. “Having an adviser you can trust keeps you grounded and focused on your financial goals, providing you with the best chance of reaching those goals.”
For Hamman, the first step to protect yourself is education, educating yourself to identify the red flags by learning from other people’s experiences, taking the time to verify communications, and seeking expert advice before making any financial commitments. “Empowerment starts with education,” says Hamman. “The more you know the harder it is for scammers to take advantage of you.”
PERSONAL FINANCE