What's a prospective investor to do?
Whether a small or big time investor, it must be a worry these days as to who to trust with your dollars. With the collapse of 20-plus financial investment companies over the past few years, investors wouldn't know who to trust and how safe their money would be. When they settle on a firm to manage their investment, it may well be a matter of "taking their chances and fingers crossed".
To avoid being taken to the cleaners, investors were told to undertake thorough due diligence on fund managers before handing over their money. It appears that most of the money lost by the investment companies that went belly up in recent years was exactly that, the hard-earned money of everyday working people.
Those who refused instant gratification and worked hard to build up their assets, including investment portfolio. Most wanted to ensure they had sufficient to live on when they stopped working. Reports of those losing their life savings are numerous. Lives are now shattered because they trusted what they were told.
The latest case of Ross Asset Management, now in the hands of receivers, is merely recent history repeating itself. Investors did check out the firm though. They were impressed. It wasn't a "new kid on the block", being a well-established Wellington fund management business. Investors were presented with forecasts and factual information. They asked questions and did everything they could to ensure they were dealing with a reputable firm.
But what gave them the most assurance was the man himself, David Ross. He had what they wanted to believe in. Integrity and believability. Impressive with the gift of the gab, which he used well to convince investors that he managed funds wisely. He promised them interest rates on their money that sounded too good to be true. And we all know that one - if it's too good to be true, it probably isn't true - and that's how it's turned out.
The Reverend Tom Poata talked about those who "dress the part but that's about all" at his Sunday service in St Faith's recently. They are people who need to have the best seats, be at the top table, wear top gear and be seen in the right places, often beside the movers and shakers. They like the trappings of power and influence. But look below the surface and they can be devoid of the "right stuff".
The right stuff being honesty, integrity and "duty of care". Tom cautioned those present to understand that we can all be influenced by "trappings" and will often make judgements on what see directly in front of us. His message was clear, be slow to judge and form an opinion. Realise that what is portrayed is not always what lies beneath the surface.
However, we do expect those in positions of responsibility to be everything they portray and more. David Ross was even taking money from investors right up to the time the Financial Markets Authority (FMA) walked in the door, knowing the business was on the verge of collapse. At the 11th hour, he could have stopped trading and saved at least a few investors the heartache of seeing their savings gone within a couple of days of handing it over to be invested.
It seems investors can do everything they possibly can to check out fund managers and their track record and yet still be taken to the cleaners. But they should realise by now that promised interest rates of 20 per cent plus is just a number plucked from the air. They should look hard at anyone presenting a likely scenario. A wolf in sheep's clothing may look impressive but a wolf does not have the investor's welfare at heart. He is driven by cunning, self service and no scruples.