KEY POINTS:
It's all very well and good for financial experts to be wise after the fact, but telling investors in failed finance company Bridgecorp that they only have themselves to blame is cold comfort and, quite frankly, cruel.
Although, I have to admit that seeing a company had a
"high-flying 80s financier" as a director would have been enough to stop me going anywhere near it, even if I hadn't known about the risky investments and the trouble in Australia. High-flying 80s financier - are there four more terrifying words?
The knowledgeable gnomes of the business pages are all now muttering into their beards deploring the greed and ignorance of investors and telling anyone who'll listen they'd seen this coming for years.
It's no wonder that people in this country choose to invest in bricks and mortar despite the protestations of the Reserve Bank governor - very seldom do you hear about houses collapsing leaving investors without a cent to show for their investment. You can borrow to buy houses, you can get insurance for your property. You can't get that with shares. And there's a very good reason for that.
Because in among all the blue-chip investments and the rock-solid companies, there are some who take people's money and then invest it with about as much care as a gambler let loose at Ellerslie.
I'm sure they think they'll make themselves and all who sail with them a fortune, but delusion and denial are tools of the trade for gamblers and some of these blokes are simply sharks dressed up in suits.
When investors in Bridgecorp read the brochures and heard terms such as "guaranteed returns", and "secured debentures", and were assured by their financial advisers that this would be a great little earner, why should they be the ones seen to be at fault?
The collapse of Bridgecorp highlights the lack of regulation in the investment industry, both in terms of the companies to invest in and the advice offered by financial consultants.
Anyone can hang up their shingle and call themselves an investment adviser, without having to pass any exams or background checks before they advertise. There is an institute to which advisers can belong, but basically it's a matter of asking around and getting word-of-mouth recommendations.
It should be against the law for advisers to get kickbacks from the companies they're telling their clients are safe bets.
I'm glad the Government has announced that it's looking at changing the rules governing companies that can take people's money. Among the suggestions are supervising and licensing "non-bank deposit takers", having credit ratings - a bit like hygiene ratings in food places - so that people can decide the level of risk they want to be exposed to, and ensuring that advisers meet professional standards and are covered by approved bodies.
In the meantime though, the level of financial knowledge of the rank and file will undoubtedly rise as more and more New Zealanders take an interest in investment through their KiwiSaver contributions. There's been a library's worth of easy-to-read financial advice books released and, as New Zealanders become more financially savvy, they'll be less easy to con.
And high-flying 80s financiers might find they have to work for their money.
