n.b. this is a true story but names and places have been changed.
A few months later Jimmy, a well-known local, told me that Tim B… was back in town promoting a great investment that would make 4% a month. Jimmy asked me what I thought.
I told Jimmy not to touch it as no bank guaranteed scheme I had ever seen would pay more than 4% or 5% a year but certainly not 48% a year. I suggested Jimmy give it a very wide berth, but he got quite cross with me and stomped off.
A few days later Tim B..… rang me and was quite indignant that I had told Jimmy to give his hot new investment offer a wide berth.
Alan ; I have never heard of a bank guaranteed scheme that pays more than 4% to 5% a year let alone 48% a year !
Tim ; it does and it is guaranteed by big global banks too
Alan; which global banks?
Tim; big ones we don’t hear about in NZ
Alan; what are their names?
Tim; very big but not known in NZ
No answer there so I tried another tack
Alan; who is the manager of the scheme, what is his name, where is he based, and what are his credentials ?
Tim; they don’t like to be too public or everyone would want in
No answer again ……………
Alan; where is their head office ?
Tim; there is one in Australia
Alan; just where in Australia ?
Tim; well it’s not really an office, it’s just a shell
You gotta be joking, I thought, but I kept trying
Alan ; most funds have an independent trustee, so who is it ? e.g. Perpetual trustees, Trustees Executors??
Tim ; Not sure
Alan ; all funds I deal with have an office, a trustee, the mangers credentials are available on line, and they have investment statements. Did this hot offer even have an investment statement?
Tim (becoming irritable) ; Look, Alan this comes through an old well known law firm in a rural North Island city and they put their money in too.
Alan; OK Tim, just give me the name of just one of the managers and his credentials
Tim; got another call, gotta go, click.
Several months later, I heard that investors could not get their money back and the authorities were investigating.
They got investors money from our town because Tim was credible - after all he used to be our local bank manager, and an old law firm from a coastal city was involved too, adding more apparent credibility.
In fact Tim & the law firm who were fronting the scheme/scam probably believed it was OK, and because they had a credible local face, investors were duped.
Funds we use
We favour asset class fund run by companies people like Dimensional Fund Advisers, based in Australia, Texas, and London. They were set up in 1982 and today look after US$200 billion.
They issue a prospectus which clearly states who they are, where they put the investors money, the trustee company they appointed, the fees, the risks , and their fund managers credentials.
Indeed one of their founders, Eugene Fama, just won a Nobel Prize.
I have visited their Sydney offices several times, met the fund managers, and observed them at work.
Steve Garth& Graham Lemmon are two of their top people, and both have PH.D’ s in finance. They have both been there for over 10 years, and I often get to talk to them at conferences.
And they don’t “promise” anything ridiculous like 48% pa.
A far cry from Tim B….… and his faceless non- existent funds.
People are still being scammed
Don’t be one of them !
Supplied by Alan Clarke, financial & retirement adviser, & author. His second book is virtually complete, & he also writes regular articles for the media & on line – see www.acfs.co.nz
Alan is an independent authorised financial adviser (AFA) FSP26532 & his disclosure statement is available on request and free of charge.