May 18, 2016

Ethics in Investing

“Anyone who says money doesn’t cause happiness is either a liar or a loser,” yelled the guru. His audience laughed as one. It was ten minutes since he bounded onto the stage, but the guru already had them seduced.

In response to banal questions, such as “Who wants more money?” hands shoot up, eager to be noticed. Let’s hear it, “Money!”. The audience obeys. “Louder!” shouts the guru. “MONEY!”

Guru? Well, no, actually a spruiker (another word for spiv or financial quack), one of dozens washed ashore by the rising tide of the property boom.

Their success-pedigree goes about as far back as the start of the boom when they bought a property or three at low prices. As prices rose, so did their egos. Their investing success had nothing to do with the economy or the market; it was their intelligence, their knowledge and, of course, those wealth secrets they discovered.

You know how it goes. The rich are rich because they know things the poor don’t know – as if there is some giant conspiracy to conceal wealth secrets. Secrets the lovable spruiker is ready to share with you – in exchange for a few thousand of your hard-earned dollars.

Speaking of ‘hard-earned’ you’re not one of those losers who has a J-O-B are you? “You know what that stands for?” asks the spruiker as he trots out his clichés from the Spivs Dictionary. J-O-B means Just Over Broke. Money comes in and then it all goes out and then, next week, you start again. For the rest of your life.

And what about retirement? Out come the scare-you-to-death figures. But, hey, it’s okay, if you’re broke and scared, don’t be – the spruiker will save you. Your personal pied piper leading you to the promised land of property riches.

These are the guys that will show you how to buy property with no-money down. But first, you have to put your money down with them. Drain your savings, borrow it, beg for it, whatever you have to do, get the money to pay the spruiker. After all, it’s the best investment you’ll ever make – an investment in how to become a successful investor, make stacks of cash and then, well, be just like the spruiker, perhaps.

For two years, I have been researching the inappropriately named ‘wealth creation industry’. And when I say researching, I mean thoroughly – who they are and what they do. I am working on a book about how property is pushed as the safest and fastest way to create wealth.

The book has three parts to it – the Pitch (how the self-professed experts attract investors/victims); the Stitch (how they stitch people) and, finally, the Rich (who really gets rich and how). So far, I have a ‘cast of characters’ numbering 102 spruikers. The research is painstaking and, because I intend to name them all, I need to be careful. I have to check and double-check every story. I want to show what these spruikers are really doing, as well as giving an insight into their characters.

If my cast of characters underwent the same scrutiny as other high-profile corporate crooks, most would be in gaol, because most wantonly break the law. They obtain money by deception.

There are two types of laws in life – legal laws and moral laws. The ethics in investing today are almost non-existent. Thanks to the spruikers – who, really, are only exploiting the mood of society – the investing world has almost become one of win at any cost.

All that was once so precious to us – our families, our friends, our nation, indeed, our deepest values – seems relegated to the second row. Indeed, the word ‘value’ is more often related to monetary worth than the measure of character.

There was a time – and not too long ago – when wealth spruikers would have been booed off the stage for some of their suggestions.

Try this idea from a sleazy Aussie spruiker. His secret on how to raise funds for an investing career is to get an advance from your parents (or grandparents) against your inheritance. “Why wait until your parents die to inherit their wealth?” he says.

And then, once you get your hands on your parents’ loot, the spruiker’s advice is to prey on other elderly folk and see if you can buy their properties below the real value. The rationale for such behaviour seems to be, “If I don’t cheat ‘em, someone else will.”

Oh, I can hear the wanna-be millionaires now, telling me I am not part of the “real world”.

No, not your world, pal.

The real world is about real people, not real estate. People such as an elderly couple who lost a chunk of their savings when they invested through one of New Zealand’s biggest investment advisers.

Last year, I met the husband in a hotel lobby in Tauranga where he gave me his paperwork. Tall, white-haired and ever-so courteous, he was a member of what journalist Tom Brokaw dubbed ‘The Greatest Generation’- one of those wonderful men in their seventies who are soon to leave us.

As I walked him to his car, I saw his wife. She was a stroke victim; her mind and her body were horribly damaged. She called out to him, well, it was more a gurgled scream. There was something about the way he treated her, patting her arm. He was so tender, so loving. As if he was repaying her for a lifetime of caring for him.

I have never seen such a poignant moment of duty and devotion which defined the meaning of unconditional love. This was a man of character. He – and so many like him – should be treated as national treasures. They should not be the targets of property investors with empty souls looking to fill their wallets.

Like a thief in the night that has robbed a part of our characters, a culture has crept into our society that tells us we can be wealthier faster. Indeed, once we know the investing secrets, we can make money out of thin air or while we sleep, anything other than having a noble job and working for a living.

Nurses, police, scientists, school-teachers, road workers, all of them are ignorant losers in the minds of the modern know-it-all investors.

These days, investment portfolios dominate many conversations. Anyone who doesn’t own at least two investment properties can feel like a loser. As the economist, John Kenneth Galbraith once said about the investing culture before the great depression, “By the summer of 1929 the market not only dominated the news, it also dominated the culture.”

Oh, that was 75 years ago, it couldn’t happen again. Well, not only could it happen, but it is happening. Both Australia and New Zealand are in the midst of their worst ever depressions.

See, there ya go again – linking a word to money. By depression I mean our mental state. As a nation, indeed in the Western world, we’re not as happy as we used to be.

A ‘happiness survey’ conducted from 1999- 2001 and released in 2003 showed that some of the financially poorest countries had the happiest people. Top three on the smiley chart were Nigeria, Mexico and Venezuela (New Zealand came in at 15, ahead of Australia at 20).

The survey confirmed that money can’t buy happiness. So there, spruikers!

Yes, yes, I know, the spruikers say that if you get rich you can improve the world by supporting charities (just like they do). If you believe that line, when was the last time you quietly threw a ten-dollar note in a charity’s collection box?

Despite all the evidence to the contrary, millions of people believe there must be a way to get rich easily and quickly. Yet who among the world’s most financially wealthy people has ever listed “attending get-rich courses” as the reason for their financial success?

In his classic book, Golden Rules of Wealth , investment adviser Noel Whittaker writes, “Everyone wants to discover a foolproof way to ‘get rich quick’, and those who are good at peddling such schemes often make thousands before their disillusioned victims find out they have been conned.”

Not only have they been conned into believing there is an alternative to “work hard, save well, invest safely and be patient,” they have also been conned into ignoring the greatest investment of all – an investment in character. That’s the one that pays the biggest dividend.

Noel Whittaker is a wealthy man, both in money and character. He’s a true success.

So, too, is the white-haired man from Tauranga.
This is an abridged version of an article that appeared in a New Zealand magazine in May 2005.

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