Posts Tagged bernie madoff
The latest Woody Allen drama, “Blue Jasmine,” is all about Cate Blanchett’s somewhat tragically bewildered New York socialite, but the shadow of Bernard Madoff hangs heavy in the background of just about every scene. Opens in theaters nationwide this weekend.
It’s hard to remember that Madoff’s massive pyramid scheme imploded at the end of 2008, the year when far more prestigious Wall Street firms were collapsing on both sides and the market itself came close to melting down.
But a $65 billion case of outright fraud resonates a lot more deeply with retail investors than a lot of the esoteric derivatives and other instruments that seized up in the credit crunch, so Madoff became the symbol of the crash in ways that no faceless CDO, MBS or MMF ever will.
Madoff was the human side of the market’s rise and fall, which is why this movie should be required viewing for every advisor who works with those retail investors today.
In Allen’s version of the story, “Hal” (played by Alec Baldwin as a consummate WASP sleaze) stands in for Madoff while Cate Blanchett is brilliant as riches-to-rags wife “Jasmine.”
The events unfold largely as they did in real life up until the crooked husband goes to jail, and then it becomes the wife’s show — and Allen’s fictionalized story of her post-Ponzi life.
It’s not too early for the buzz to start around Blanchett winning another Academy Award for this, simply because she makes a character that would otherwise become a caricature into someone complex and even pitiable by the time the credits roll. Bernie or his fictional doppelganger was the villain of both stories, but at least in Allen’s world, Mrs. Madoff is the victim and the star.
And it’s worth dissecting once again just how Madoff’s victims felt when they learned their money was gone. This case provoked rage against financial advisors like none other. Celebrities, charities, clergy bought Bernie’s claims and bet big chunks of their investable assets on his scheme, only to watch it all evaporate.
The regulators were so embarrassed that even to this day the SEC and FINRA hold the Ponzi scheme in special contempt and will move mountains to root out even the slightest hints of anything that looks, smells or quacks like Bernie’s scam.
Custody and sham accounting were the big red flags. Advisors who maintain custody of their own clients’ assets are under the microscope 24/7 now because it was too easy for Bernie to doctor his statements for decades with no third-party custodian watching over his shoulder.
And his accounting firm was, according to all accounts, a cruel joke more interested in rubber-stamping his performance numbers than asking the hard questions.
Insiders blew the whistles as loudly and often as they could, but the tips were never really followed up on, even after Bernie suddenly decided to register as an RIA a decade after getting the scam rolling. FINRA and the SEC blamed each other and nothing got done until it was too late.
You’re nothing like Bernie Madoff. You have rules governing your behavior and people checking your claims. It’s still a good idea to let your clients and prospects know what exactly you do to protect them to the point where you couldn’t pull off anything like this even if — in the most bizarre scenario imaginable — you actually wanted to try.
Remind them that there are bad actors in the market and teach them how to spot the warning signs. They should check the discipline records on file with the regulators and call around. You can show them how to do this by starting with your own disclosure forms and official supervisory profile.
Clearly Bernie’s ghost is still present for Woody Allen at least. And if this movie refreshes the memories of people who lost money or know someone who did, a little exorcism may be called for.
Madoff was the best marketing device for honest advisors in years. It’s just a shame that so many innocent people had to lose so much money to give everyone else a way to learn a key lesson.