The local paper has reported that Ross Tarrant has closed the financial planning arm of his business.
Ross Tarrant’s business survived the financial crisis – according to quotes attributed to him in the local paper – by taking undisclosed commissions called “marketing allowances” to direct money into Astarra funds.
His business however it appears does not survive his clients having their retirement savings stolen.
The Tarrants website is dead today too.
Australia has a system of privatized social security. The US flirted with such a system too. However this case shows that getting ordinary members of the public to deal with intermediaries (brokers, financial planners etc) can often be a quite one-side affair. The local paper also points to a local (coal) miner who lost $200 thousand in this debacle. He says he would never have invested had he known about the secret commissions. I guess that is why they were secret.
John
ReplyDeleteAre there new rules coming in to prevent this stuff in the future?
The Mercury is Fairfax for all its issues (cant get a name right and dumbed down version of the Herald), has run some credible campaigns that News probably wouldn't notably pedophiles in the local church and that with a RC editor. It also has a local feel to it still which a lot of regional papers dont. no personal interest stated!
ReplyDeleteI assume Peter Johnston still hasn't taken that bet?
ReplyDeleteT
Despite not being leftie by any margin, I have some serious doubts about entirely privatised social system. Basically, it's a very large invitation to either fraud (if the market for it is fragmented), or extracting large rents (if it isn't).
ReplyDeleteI'd love to come up with something that would solve it, but just about anything ends too convoluted.
The only thing I can even remotely think of is alongside-investing.
That is, people would not invest for a fee as such, but would alongside someone, who would be required to have say 20-40% of investment in the vehicle. It would also prevent the funds from becoming way too large, when they can't invest efficiently anymore either.
This should be still attractive to the good investors (more money = lower fixed costs and ability to pursue a few more opportunities at any given time), and dissuade me-too incapable ones.
The current percentage-upside-option model is just wrong, and leads to a whole host of skewed incentives.
As an American, I find this fascinating--and completely unreported in this country (as far as I can tell). Thanks once again for your blog, JH.
ReplyDelete401ks in the US mostly funnel to 3 or 4 big mutual fund companies, due to partnerships between major payroll processors and the funds. The funds performances are mediocre to poor. Here we see that restricting individual choices can be a very bad thing. I'd rather take my chances with more choices and more fraud potential, rather than be restricted to a few options which grow to be these huge, fat, inefficient capital allocators.
ReplyDeletePerhaps a good question to ask Ross Tarrant is did he (and a staffer) enjoy his trip to the rugby 7's in Hong Kong this year?
ReplyDeleteAnd did he charge it to the firm as a business expense in Australia for tax purposes given he put it about he intended to go and find where clients monies had gone?