Does it sound too good to be true? 7 signs that it's a dodgy get-rich-quick scam


56 days ago

The Direct Selling Association of South Africa (DSA) has encouraged consumers to be cautious of get-rich-quick schemes that are on the rise across the country.

It's important for consumers to always do their homework before making any financial decisions, the Financial Sector Conduct Authority (FSCA) advises.

The FSCA's head of consumer education, Lyndwill Clarke, says Ponzi and pyramid schemes can have devastating consequences on families.

A Ponzi scheme involves giving money to a portfolio manager. When investors want their money back, they are paid out with the incoming funds contributed by other investors.

A pyramid scheme involves a chain of recruitment, where initial investors, in turn, recruit other investors for financial gain.

Clarke urges consumers to do their research, verify the legitimacy of any financial company, and ask questions about their offering and their remuneration structure.

"If you want to sell any financial product, you need to be authorised by the Financial Sector Conduct Authority (FSCA)", an expert warns.

Below are some red flags:

  • If the company is not registered with the Financial Sector Conduct Authority
  • If there is no underlying product or service being offered
  • If there is a lack of paperwork or legitimate documentation required
  • If the company has no oversight mechanism for accountability
  • If the company offers a suspiciously high return on your initial investment
  • If the projections aren't consistent with the current market conditions/economic climate

  • If the compensation plan involves payment for recruiting others

If it sounds too good to be true, it is most probably too good to be true.

Lyndwill Clarke, Head of Consumer Education - Financial Sector Conduct Authority (FSCA)

If somebody offers you a 50% increase in your money, you should be immediately weary of that.

Lyndwill Clarke, Head of Consumer Education - Financial Sector Conduct Authority (FSCA)

If you want to sell any financial product, you need to be authorised by the Financial Sector Conduct Authority (FSCA). Anything outside of that is not a legal product.

Lyndwill Clarke, Head of Consumer Education - Financial Sector Conduct Authority (FSCA)

In the current economic climate, people are quite desperate for money... sometimes it's also a matter of a lack of education or proper research.

Lyndwill Clarke, Head of Consumer Education - Financial Sector Conduct Authority (FSCA)

Listen for more advice and information:

This article first appeared on CapeTalk : Does it sound too good to be true? 7 signs that it's a dodgy get-rich-quick scam

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