Bob O'Brien
Head Instructor
bobrien@mywealth.com
As the fallout from the Bernard Madoff scandal continues to be unraveled, the story only gets sadder and sadder. Many people seem to believe that the victims are just very wealthy people, but this is absolutely not the case. Some of the victims are retirees that have lost everything and can no longer pay their day to day bills.
I think it is important to make certain that we point out a few things that will help you avoid something like this ever happening to you.
1. Stay diversified. Never put all of your money with one person and especially one hedge fund regardless of how good the rates of returns are. Some of these investment arrangements have a tremendous amount of control and power over your money, and therefore you should never put all your eggs in a basket like that!
2. The better the returns the more you should question their ethics. It’s been reported that Madoff’s hedge fund averaged a 12% return over the long run with very few years where there were losses. These are not practical rates of returns over the long run. In fact, in 2008 even some of the best hedge funds have been down 20%.
3. Make certain that the firm is using independent clearing and accounting firms. This is so important, because this is what allowed Maddoff to get away with what he did. He had his own brokerage and accounting people. This is also why it is certain that others will be indicted. You can’t create a $50 billion ponzi scheme without a least a couple of other people that are willingly go along for the ride.
4. Don’t rely on the government to regulate everything. I would be the first one to agree that the regulators dropped the ball here, but when it comes to your money there is no one that cares more about it than you. The government can’t regulate everything, and more often it is only after the real damage is done do they create the preventive regulations.
5. Don’t assume just because someone is very involved with charities that they are completely ethical. I am sure that you have heard of the numerous charities that no longer exist because of this scandal. These can be false fronts, and there have been numerous unethical people that have been involved with charities. Even a “saint” can lose their moral compass.
6. Continue to seek financial education. It’s really easy to say that you can’t trust anyone in this world, but we have to trust people. We need certain people that have expertise in certain areas and for every one Bernard Madoff there are hundreds of people that want to do right by other people. Empowering yourself in regards to your health and finances is a must. Double checking, researching and getting second opinions are a personal responsibility in order to avoid a personal disaster!
In conclusion, never trust anyone more than yourself with your money. You’re the quarterback and you have a team when it comes to certain areas that you need expertise, such as taxes, investing, insurance and legal issues. Seeking additional financial education is a must if you want to stay away from a real disaster. Blind faith in anything or in anyone is a disaster waiting to happen. Trust, but verify… and you need knowledge in order to verify properly.
So don’t forget to check out our courses so that you will have the background that you need when checking up on those who are on your “financial team”!
Sincerely,
Bob O’Brien
Sr. Instructor
www.mywealth.com
