New Zealand has seen versions of this story before, and it rarely ends well for the people at the bottom of the chain. Almost 20 years ago, as many as 3000 investors lost money in Blue Chip and Merlot Property Group. Months before Blue Chip collapsed, I’d been cold-called by the company, and I decided to pretend to be interested. The article from that exchange is still online.
Ironically, Binnie called Du Val founder Kenyon Clarke a “dear friend”. The BusinessDesk podcast, The Fall of the House of Du Val, is compelling listening. Investments sold as low risk were anything but.
In New Zealand, financial services companies selling to “wholesale investors” face far lower disclosure and compliance requirements than when dealing with the average person. Someone can qualify as a wholesale investor if they earn over $200,000 a year, have more than $1 million in net assets, or are certified by a financial adviser as an “experienced investor”. Maria Slade’s Du Val investigation found advisers signing people off as “experienced investors” when, in some cases, their only investing experience was a KiwiSaver account.
Even if someone is a high-earning heart surgeon, or ex–All Black with substantial wealth, that doesn’t automatically make them sophisticated investors.
Get-rich-quick doesn’t just pop up in property. Every decade, there is a new crop of investments promising to make people rich quickly but instead leaving them poorer. It has happened with crypto. The biggest crypto blow-ups weren’t Bitcoin or other currencies. They were about so-called yield products and passive income schemes. Investors were promised returns of 8%, 10%, 15% or even 20% a year simply for depositing their crypto with platforms such as Celsius, BlockFi and Voyager.
The pitch rarely changes, only the product being sold does. Property flips, private lending, complex crypto investments or unlisted equity deals all look different on the surface. But the get-rich-quick sales pitch is often very familiar, starting with videos on Instagram, TikTok, Facebook and YouTube. You’ll see someone in a nice car, on a beach, or sitting on their sofa explaining how they made more in a month than most people earn in a year.
They’ll talk about “passive income”, “wealth-building system”, “AI-powered this or that”, “exclusive opportunity” and so on.
Sometimes getting rich slow, by investing a little and regularly, can be a whole lot safer and more productive in the long run than falling for someone’s smooth patter.
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