Posted by BE on June 5th, 2011
Perhaps the most important precept in consumer affairs is ‘caveat emptor’ – let the buyer beware. I would have thought this applied as much to investing one’s life savings in a finance company offering above average returns as to buying a flat screen TV or washing machine from a discount store. More really, since in the first case we’re talking about hundreds of thousands of dollars while, in the second, maybe a few hundred bucks will be at stake and the product will be covered by the Consumer Guarantees Act anyway.
In the first instance, therefore, a sensible investor might be wise to get some advice from someone in the finance advisory sector, though preferably not from an advisor employed by the same bank that has a controlling stake in the finance company flogging the product. That advisor just might not be entirely objective… or honest.
On the other hand, an investor might take the advice of Richard Long, a former television newsreader, on what to do with their retirement funds, or former sports broadcaster, Keith Quinn, on preparing for his or her own eventual demise, or former cricket captain, Stephen Fleming, on how to best warm or cool their home, or (if they prefer fencing paddocks to news-reading) former All Black, Colin Meads, on what to do with their retirement funds, or funny man Mike King on where to buy… well… just about anything.
In every case that would be a pretty stupid thing to do, since Richard has no expertise in investing for retirement, Keith, despite appearances, is not dead, Stephen probably couldn’t wire a fuse, Colin, well, just listen to the man, and Mike King tells jokes for a living, which really ought to be a warning in itself.
We’re supposed to be sorry for all those ‘Mum and Dad’ investors who did their dough in Hanover or Provincial or Blue Chip or some other appallingly badly managed outfit. But I’m finding it difficult. I’m finding it difficult because if you’re in your sixties or seventies and have managed to put together a few bob, you ought to have the wit to realise that every well-known person who fronts a commercial, however moral, however decent, at that moment becomes a huckster, handsomely paid to lend their good name to a product which, in the case of a finance company, they cannot possibly know, let alone guarantee, will deliver the returns it promises.
It’s tempting of course. I’ve made two commercials myself – one for an educational part-work and the other for a financial product. I was paid a pittance for the first, which made millions for the publisher, and rather a lot for the second which, for complex technical reasons, never went to air. That really is the only sort of commercial I would recommend to my showbiz friends – the type that rewards you well but never sees the light of day. They are, sadly, few and far between.
Now the guy who could make a packet out of lending his name to anything from tinned spaghetti to Mercedes Benz is my old friend Kevin Milne. Because Kevin combines some things that don’t usually go together – decency, niceness, honesty, lack of ego, being simultaneously the archetypal Kiwi bloke and the brightest star in the television sky. And that, mes amis, is worth megabucks in the advertising firmament.
But there’s a problem with advertising – It tends to leave a stain on the reputation that no amount of money and no cleanser can ever totally remove.
Trust me. I’m an interviewer after all. We hold the bad guys to account. Which is why you can be sure that Brian’s Bountiful Bonds with money-back guarantee* will never let you down.
(*Conditions may apply.)
Brian, if its any consolation I would never buy anything you promoted. I would have the good sense to realise that if you did a TV promo you must have some desperate need for the money ( hey shit happens) I’d feel some sympathy for you but I would not buy the product out of principle.
“We’re supposed to be sorry for all those ‘Mum and Dad’ investors … but I’m finding it difficult… because if you’re in your sixties or seventies and have managed to put together a few bob, you ought [to know better]”
I’ve paraphrased, but hopefully maintained the thrust of your point?
I don’t agree with you, based solely on my own experience with my senior parents. And some of their friends. They worked their whole lives, did the ‘right thing’ by saving for their retirement, and when they did they (my parents) had a reasonable nest-egg of $500k. What to do with it?
My father was seduced by those ads in the Business section of the NZ Herald, that ran week in week out. All offered a very high rate of interest, and all boasted “debenture secured” “mortage guarranteed” or similar. Some were fronted by ‘trustworthy’ individuals, and some even had former political figures on their boards.
I had to argue stongly with my father not to invest his money with these companies, pointing out the debenture or mortgage was often secured against a company that had no assets. He argued back, insisting that they couldn’t misled people like that, that the government wouldn’t let them, etc etc.
Long story short, my father was raised in an old fashioned time and had no idea what a deregulated cowboy financial market we now had in NZ. You and I might be media cynics Brian, but many people were fooled by the puff pieces in our press (particularly the financial pages) telling us how well the property market was doing, what great returns were on offer, and what sterling individuals we had running the show. The governments of the day seemingly endorsed it all by deregulating further, because clearly the markets could run themselves.
These guys made their fortunes when “mum and dad investors” were convinced by the media that they’d be muggins not to jump on the property ladder, that EVERYONE was making a packet, and that property prices just kept on going up. Which is why we had so many 60-70+ year olds keen to show they were still ‘smart’ enough to get in on the action…
The GFC has shown us that the markets can’t be trusted to run themselves, and they should be regulated. Sadly, for some strange reason, governments around the world (the US in particular) have failed to take any real action.
BE: Fair enough. I suppose I’m a bit smug, having stashed my loot in a shoe-box under the bed for the last 70-odd years. Not much interest, I’ll admit, but it’s still there in pounds, shillings and pence.
The problem is that those who had the wit to seek ‘independent’ advice from the finance advisory sector got ripped off as well. One of the major banks sold a product of a company in which they were a major shareholder as ‘low risk’ which it clearly was not. Many of the so called independent advisors were anything but independent getting large commissions from finance companies recommended. The real leson from all this is trust no so caled advisor with your money. Do your own research into whatever investment you are making. If you are unwillling or unable to do that then forgo the extra one or two per cent and bung your cash in a fixed term deposit and pray that the CEO did not go to the Sir Fred Goodwin School of Banking.
Sadly there are those who are influenced by the likes of Long and Meads; fine upstanding members of the community. I mean how could you fail to trust someone who could read an auto cue? How could you possibly be let down by someone who has left rucking scars around the globe? That was why they were engaged and they should have had the wit to know this. They had no right to make such statements when they did not have the expertise to verify them independently. It is a pity that a group of investors never took a test case against these so called celebrities claiming that they acted on the assurances, “solid as” and similar drivel. What infuriates me is that Meads appears unabashed and now advertises some health product. Can anyone take the man seriously?
As for those who advertise heat pumps and other consumer products, we know they have prostituted themselves, they have no expertise in the subject but at least if the product fails one’s life savings are not involved in them.
Personally I think anyone who fronts an advertisement, whether celebrity or not, should have a financial liabilty if the claims turn out to be false whether or not they are aware of the falsehood. That might make them think before they shovel the cash into their wallets and spout whatever drivel is in the script.
BE: I agree with most of that. However, if the government carries out its intent to bring in legislation which will heavily penalise celebrities who lend their names to products, including financial products, which fail, leaving punters out of pocket, I suspect very few celebrities will want to take that risk. There is also going to be much greater legislative oversight and regulation of financial advisers.
BE ! at last ! your endorsement is just what I have been waiting for. just as soon as I tell that nice nigerian gentleman I have decided to pass over his wonderful banking opportunity I will divert the funds to you.gosh ! wealth and happiness at last. I know your media savvy will make me rich. I trust you far more than richard long.
BE: Look forward to receiving the dough. As my hero Monty Burns would say, “Exxxcellent!”
Here I am trusting you with my email address, Brian!
I’ve never had to deal with the problem of where to invest surplus money, but it has occurred to me as strange that many of those with sufficient nouse to have accumulated significant savings failed to grasp the well known rule “the higher the return, the higher the risk”.
Pension day coming up Brian. Might take a punt in your scheme. Now can you give me your word as a famous person that all will be well?
BE: Of course you have my word. As I often say to pensioners like yourself: ‘Trust me, I’m a doctor.”
“The GFC has shown us that the markets can’t be trusted to run themselves, and they should be regulated. Sadly, for some strange reason, governments around the world…have failed to take any real action”.
OK, I’ll have a go as the token capitalist. Why, if you don’t think you can trust the ‘market’ (which is ultimately your fellow-man in collective form) do you possibly think you can trust your fellow man in another collective form, the government?
Read your piece, Nick, and while I have sympathy for your dad, I make some observations. I’m 44, and old enough to remember the angst caused to those of a more trusting generation by both the reneging on Super surcharge election promises (in 1984, and 1990, by both Labour and National), and also the crash of 1987. How anyone with your dad’s supposed accumulated experience and wisdom can conclude, “they couldn’t misled people like that, that the government wouldn’t let them, etc etc.” is beyond me. Regrettably, I’d have to conclude it was a case of willful ignorance. The Reserve Bank governor was warning long and loud about over-valued property. Like I say, your dad has my sympathy, but I’ll be damned if a single one of my hard-earned cents are spent making good his losses.
Like Brian says, surely the data is there that caveat emptor always applies.
Oh yes, and, Brian – “Colin (Meads), well, just listen to the man”. Don’t dispute the Pinetree is no financial whizz, but a bit of snobbery on your part, I’d suggest. What exactly does a ‘financial expert’ sound like? Alan Hubbard? A hayseed like Henry Ford? Or something like the guys who fooled Nick’s dad? Frontier cultures like Americans and Kiwis are always suckers for a confident speaker with an overseas accent to add a bit of gravitas, say from the Ulster region for example – step on up Brian….Gaynor.
Colin Meads may have a quintessential Kiwi provincial accent and diction, but when he speaks on that which he knows, he is a bloody funny and self-deprecating man – which actually reflects a high degree of intelligence. Didn’t much care for the undercurrent your comment about Meads implies. But a pity he’s damaged his “brand” as your post rightly states.
BE: My point was that he was speaking “on that which he knows NOT”.
“but it’s still there in pounds, shillings and pence. ” hey that old money is worth a fortune on the collectors market you may have stumbled on a solid investment idea Brian – are you willing to endorse it on the telly?
BE: Just checked under the bed. Money gone and Judy nowhere to be seen!
I agree with Nick,the Government allowed these people to florish.They continue to drag their heels whilst the likes of Watson et al live in relative luxury, untethered from the suffering of their investors.Asking a script reader (no matter how trusted or famous)to take responsibility for these peoples actions is ridiculous.It ignores the core of the problem and considers laying the blame at a party who has little or no control of the events carried out in the name of profit.
“They had no right to make such statements when they did not have the expertise to verify them independently”.
Don’t dispute they had no expertise, but they had every right. Just like “environmental expert” Keisha Castle Hughes has ever right to oppose Coromandel mining, “international labour relations researcher” Robyn Malcolm can opine on movie industry contracting processes, and “world renowned pediatrics consultant” Lucy Lawless can serve on the board of trustees of Auckland Starship hospital.
What part of caveat emptor is not clear? Why are you looking to do the impossible – protecting the willfully stupid and ignorant, while inhibiting the freedoms of others?
“I suspect very few celebrities will want to take that risk.”
If that is the result; great!
Kimbo you are of course correct; they did have the right. Sadly there was no responsibilty to go with that right.
Yup, Ben, I’m with you. If, as a result, no celebrities are prepared to front ads for financial products, that’s the best win there could be. The only reason for hiring a celebrity is to create emotional appeal – if none are hired, the “investments” are more likely to be judged by rational standards. Good result all around, I say. And the celebrities still have heat pumps…
“Sadly there was no responsibility to go with that right”.
And sadly, I concede you are very right on that point
BE: I know, you’ve put much stock on the likes of Richard Long and Colin Meads et al, being responsible for many older folk taking a caning. But, really, were they that instrumental in luring these poor bovines into the slaughterhouse?
I mean, Long ‘distinguished’ himself as a rather handy auto-cue newsreader; literally, everything he uttered was prepared and written by someone else (banal chit-chat, aside). And I’m willing to bet, dollars to donouts, he would confuse “secured debentures” with an appointment at the dentist for an oral refit of ‘something artificial’. And, I’d also bet, if Pine Tree were manning his local rugby club’s fundraising one-dollar sausage sizzle, he’d wince, if he had to calculate the change when given denominational notes.
They knew, nothing, about what they were selling to the public. Coming as close as you can get to being called “mercenary hucksters” for the principals of the fincos who paid them. They were: Paid purveyors by proxy.
No, the real blame lies with the very slack governmental regulatory agency, the Securities Commission; and its more-often-than-not AWOL head, Jane Diplock. To say, she was “asleep at the wheel”, is to traffic in understatement. Also, the legal profession; the very questionable conduct of the lawyers, who acted as consiglores for the likes of Hotchin (1 and 2), Petricevic et al — throws into sharp relief their role as being the architects in constructing the House of Cards. And, lest we forget: the ‘wizened’ Justice James Weir’s decision to suppress Hotchin’s name, when he was found out, being duped, in a patently recognisable Ponzi scam; thereby, guaranteeing the incalculable loss of future investors’ money by their being kept ignorant of this Hanover principal’s reckless quest for pursuing profits. At all cost.
The above, all assume a higher level of culpability rather than the feckless “celebs”, hawking themselves off to the highest bidder.
BE: I don’t think I’ve said that Long or Meads were ‘responsible for many old folk taking a caning’. But they would certainly have added some credibility to the offers in those ‘old folks’ eyes. I also would not agree that the two men would not have researched what they were advertising as well as they could. But that was almost certainly not well enough. And while we’re about it, how many financial whizz-kids predicted the world-wide collapse in financial markets that started all this off?
To think that removing celebrity status will safeguard investors funds ,it doesnt address the real issue.Although Richard Long might have lured a few to the Hanover Trap,it was quite common knowledge , that the Hanovers of this world were doomed to failure.The celebrity advertising issue is a red herring, which in future may create another form of deception.Endorsement of a celebrity leads to people losing their money. Does this mean non celebrity endorsement has a better chance of sucess?
ah, kimbo and merv- i like your work- partly because you wouldn’t give a toss about whether i liked it or not.
i disagree about meads at the sausage sizzle. good farmers-of which he is one(retired or not)- have a very sharp and scottish attitude to money. also – are you talking about the deer velvet ad for meads? or was he in a finance company ad too? maybe those celebrities believed , however wrongly, in the company they had endorsed- richard long may have been sucked in to invest, himself? conviction tipped by a whacking fee. we’re talking in the past aren’t we? – the recession fallout where someone was always going to get hurt. these sagas have surely been a lesson for these ‘famous’ people. they will still be cringing in raw embarrassment even now- and i bet they’ve learnt their lesson.
a case of regulation being a sledge hammer to kill an ant- often the majority enduring a poor law for a minority’s faulty failings. knee jerk law. nanny state…
If there can be good news in all of this it is that the public are becoming jaded to the idea that celebrity = credible. The thinking, buying public are becoming wise to the fact the celebrity is a media construct thanks to reality TV.
Would you invest in a financial product endorsed by last years winner of New Zealand’s Next Top Model? Or purchase insurance because a former Dancing with the Stars contestant said that it was a good idea?
In the last five years we have seen the rise of the manufactured celebrity and the good thing is that is has shone a light on all celebrity and shown that for better or worse are only what the media want us to see.
And for better or worse it gives Kevin Miln and Danielle Hayes (Winner of last years NZ’s Next top anorexic) the same level of credibility.
Kevin’s reputation was created by the same people that made Danielle a house hold name.
Use Garfieild’s (The fat ginger cat’s) Law when looking at any piece of advertising. The only thing the advertiser will guarantee, in writing, is that they will make more money out of any transaction, than you will.
There is a sage piece of advice floating around for at least 50 years to the effect that if it is advertised on television it is not worth buying.
Caveat emptor indeed!
BE:… I also would not agree that the two men would not have researched what they were advertising as well as they could. But that was almost certainly not well enough. And while we’re about it, how many financial whizz-kids predicted the world-wide collapse in financial markets that started all this off?
What was there to research? They had zilch expertise to know what questions to ask. And if they did know, how could they possibly verify the answers, given? They’d have to be able to see the Sale and Purchase Agreements, to know who was holding the first mortgages on the deals. And I tell you, right now, it wasn’t Hanover investors’ money. (Unless, it was for the purchase of assets for Hotchin and Watson). I’m guessing, that Hanover was used for — shonky — second, third and (even worse) unregistered mortgages. Generous unsecured credit lines extended on the basis of open-ended caveats being registered on the titles; now, proving to be valueless. How else, can it be that there’s going to be so very little to recover from the $550 million owed? It’s basically gone down the drain.
I’m sorry, but when it came to financial securities and property, both Long and Meads know Jack Schitt. All very well, lending your name to elevate and enhance the profile of a product; quite something else to — earnestly — vouch for that product’s efficacy, when you have no idea.
There is a fundamental point of difference between hand-on-heart attesting to something you can’t be sure of and not being able to “predict” tumultuous changes and outcomes.
Lesson: Anytime you see celebrity endorsements, give that product a wide berth.
got to say- i’d love to have dan carter keeping me warm – so i am always going to be disappointed if i buy that heatpump.”so………….. where’s dan,then!???”
I think my favourite celebrity endorsement was a product years ago – I cannot remember which one – sold with the sign, “as seen on Fair Go”
People have been saying for decades that one of the reasons for poor growth in the NZ economy is due to over investment in property, and under-investment in the productive sector.
Yet why would anyone put money into anything else when you see the rogues, sharks and cowboys who infest the stockmarket and the investment advisory business.
Its also interesting to see several business reporters comment that they were aware that most of the finance companies were bound to fail but couldn’t write about it for legal reasons.
Celebrity endorsements are just the tip of this iceberg – I hesitate to recommend more government regulation of anything, but this area requires something to bring the standards up to those of other western countries.
This helps to clarify investment thinking
This could help with that investment decision making
…every well-known person who fronts a commercial, however moral, however decent, at that moment becomes a huckster…
Isn’t the term ‘Schill’?
How dare you insinuate that Keith Quinn isn’t dead. Show me proof or I’ll put you forward for a Spec-savers ad!
“How dare you insinuate that Keith Quinn isn’t dead. Show me proof…”
Does, “Ah, Ah, Lomuuuu…” count as death throes?
Legislation would have a real problem with that.
John Key is regarded as an entertainment celebrity. Should he be held to the same rules of accountability? A $1,000,000 fine you say.
I know the left will hate this . But if we had floated some electricity shares in the 2000s and encouraged the oldies with cash to invest in bluechip companies not bloody bluechip then we all woud have been better off.
Sometimes partial privateiation is a way of encourageing the ivestment capital to go somewhere because nature hates a vacum.
On the same note our most sucsessful company is a co-op which dosent admit mums and dads investers
These people had limited choice buy more flats or invest in hanover etc
It wasnt the all the fault of the last government but Ms Daziel as minister at the time was warned by experts. but like the leaky home problem these people were not seen as labour party suporters so the phrase “let them eat cake” is proberly correct
Kimbo, Keith was in the “throes”, all right. But it wasn’t death. Quite the opposite.
Not bad for an old fellah.
“Sadly there are those who are influenced by the likes of … Meads”
Meads? MEADS???? That’s SIR Colin to you, serf! We still live in an outpost of Mother England in case you haven’t noticed.
no.11-a message from colin- bugger off.
@ Sean “Isn’t the term ‘Schill’?”
Number 11: thank you; you have reminded me of everything that is wrong with the honours’ system
Five years ago when I used to participate in focus groups for a market “research” company, we were shown a shortlist of celebrity names to present ads for, and endorse, a new financial product (reverse mortgages, actually).
The front runner was a well-liked TV personality. Alas for her, two of us in the group remembered previously reading a magazine article about her buying her first house aged in her fifties, because she had never had the knack of saving money. We said she was the last person we would take financial advice from. The group agreed.
As no one else in the short list met with the confidence of the group, either, they were all scrapped and the client went off in search of a new list of potential endorsers. Presumably drawing from the same pool of well-known names in TV or sport, as the first list had been.
We were told that noone on the list had been approached, or knew that they were on it.
And that’s how financial companies find their spokespeople. Expertise has nowt to do with it, it’s box-office appeal they look for.
It was dark when I woke. This is a ray of snusihne.
Surely the bottom line for any financial transaction is,CAVEAT EMPTOR.