How financial advisers can help clients stay safe from scams

In an increasingly digital world, financial scams have become more sophisticated and frequent, posing a serious threat to the hard-earned savings and retirement plans of everyday consumers. From deceptive phishing emails to elaborate fraudulent investment schemes, these scams can wipe out a lifetime of disciplined saving in an instant. Protecting your client’s financial future is no longer just about investing wisely; it’s also about building a robust defence against these pervasive threats.

Data from recent reports highlights the alarming trends in financial crime. According to the South African Banking Risk Information Centre (SABRIC) Annual Crime Statistics for 2024, digital banking fraud remains the most popular channel for criminals. Reported incidents in this category almost doubled last year, surging from 31,612 cases in 2023 to 64,000 in 2024. As a result, financial losses from digital banking fraud increased from R1 billion to over R1.4 billion.

The rise of AI fraudsters

A key factor driving this growth is the increasing use of artificial intelligence (AI) by fraudsters. AI-powered tools like FraudGPT, for example, allow criminals to create highly convincing phishing emails, hack systems, and exploit weaknesses on a massive scale. As SABRIC warns, AI-driven crime is a growing concern, with reports of voice-cloned deepfakes impersonating individuals and officials to deceive victims. These trends show that criminals are not targeting technical weaknesses in banking and financial services platforms but rather the human element through social engineering – using emotional triggers to pressure and trick people into giving up their sensitive information or handing over money.

Retirement funds are a prime target because they often represent a person’s largest pool of long-term savings. The introduction of the two-pot retirement withdrawal system means that there is an increased likelihood of scammers and fraudsters targeting retirement fund members. When these funds are lost to fraud, they are exceptionally difficult to recover, placing the individual’s financial security in retirement in serious jeopardy. It’s a threat that requires a proactive and informed defence.

What to look out for

To protect your clients, you need to tell them what to look for.

• Common scams include phishing, which are deceptive emails, calls, or texts that pretend to be from trusted institutions like banks, insurers, or your financial adviser, designed to steal personal information.
• They need to be aware of fake and fraudulent investment opportunities that promise unrealistically high returns with little to no risk. When an opportunity sounds too good to be true, it likely is, and there could well be fraudsters at work.
• Lastly, with identity theft on the rise, they need to be on the lookout for attempts to steal their personal details to gain access to their accounts.

Financial advisers are the first line of defence. You can help clients recognise red flags, including unsolicited offers, high-pressure sales tactics, suspicious links, and requests for sensitive personal information. Continuous education is vital for staying ahead of new and emerging threats, significantly reducing your clients’ chances of becoming a victim.

The importance of a strong financial foundation

Beyond simply identifying threats, adviser can help clients build a strong financial foundation that is more difficult for scammers to penetrate. This includes establishing an emergency fund to act as a buffer against unexpected financial shocks; encouraging the use of multi-factor authentication on all financial accounts to create an additional barrier against unauthorised access; and helping to regularly monitor accounts for any unusual activity and spot fraudulent transactions before they cause serious damage.

In a digital-first world, financial planning must include digital security. Advisers should provide guidance on secure online behaviour, good password hygiene, and device safety. You can also recommend trusted digital platforms and alert to emerging threats, ensuring financial plans remain secure in a digital age.

A trusted relationship

The foundation of effective fraud prevention is a strong and trusted relationship between clients and advisers. When you have open and frequent communication, clients are more likely to feel comfortable reporting suspicious activities promptly, allowing for swift action.

Your clients’ financial future is too important to leave to chance. With the trends in financial crime becoming more advanced, a proactive and informed defence is the most powerful tool to protect a lifetime of savings.