Irish Financial Review

Protecting Against Fraud and Financial Exploitation

New Seminar Series to tackle serious financial issue.

What is financial exploitation? Generally, financial exploitation is viewed as a problem that affects senior citizens but it can happen to anybody, especially where the victim may suffer from a physical or mental disability.

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MoneyWhizz seminars will highlight the risks of fraud and financial exploitation

Who are the abusers?

Perpetrators of financial exploitation can be:

  • Family members and caregivers
  • Friends, neighbours or acquaintances
  • Persons with Power of Attorney (POA) or the legal authority to access or manage your money
  • Telephone and mail scammers
  • Financial advisers
  • Internet scammers
  • Home repair  / home improvement contractors
  • Other persons known or unknown to the victim

 Why do you think victims can be reluctant to report financial exploitation?

  • Shame and embarrassment ̶ Many people are ashamed to admit that they have been financially exploited.
  • Loyalty ̶ Reluctance to report a family member, caregiver or other person who may treat them well in other ways.
  • Fear of retaliation, not being believed or losing their independence by being declared incompetent and moved into a “nursing home.”

New MoneyWhizz talk discusses warning signs and the types of fraud and financial exploitation, how to protect against incidents of such and actions that can be taken if one is a victim.

Discussing the talk, Frank Conway, Founder of MoneyWhizz.org said “This is an opportunity for anybody that is concerned about their own financial well-being or that of a loved one to develop an understanding of the warning signs and actions they can take to protect against fraud and financial exploitation” 

The seminars are being made available through select employers as an employee benefit.

Pensioners cheated out of Billions

By Frank Conway, BSc, QFA

In his annual letter to shareholders, Warren Buffett estimates that up to €100 Billion of investors money is wasted by high-flying investment managers. These are the people that tell their customers only ‘they know how to invest money, only they should travel the world in high-flying luxury seeking out ‘clues’ about the next big thing and only that they know best!’

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‘I told you so!’ Investors lose Billions as Buffett wins bet that passive beats active management hands down

Nonsense” says Buffett.

Nonsense because his 10-year wager that tossing the high flying ‘active’ managers overboard would generate more wealth, not less has proven to be an overwhelming success.

Buffett was right all along.

So, let’s take a step back and look at what the debate is really all about.

10 years ago, Warren Buffett predicted that the evolution of the stock market meant that over time, as computer trading took an increasingly central role in the purchase and sale of equities and other investments, the role of the investment manager would become a less central one. But more important, the role of the ‘active’ manager would be exposed as an expensive fraud.

Despite this, investment managers have clung to power.

In theory, the concept should make sense but in reality, it does not and there is an ocean of evidence to prove that paying these stock market ‘visionaries’ is a massive waste of money, in fact, it is a massive con-job.

And the people the lose the most? Ordinary pensioners savings for their future retirement needs.

Using the normal distribution curve, the mounting evidence against highly paid, ‘active’ investors is damning and perhaps the figure that best sums up the massive waste is Mr. Buffet’s $100 Billion.

€100 Billion lost to ego, greed and inefficiency.

For investors that care about their own financial well-being, it is imperative they get to know how to take back control of their own financial success.

Understanding how fees destroy their personal wealth growth is an important first step to stemming the loss.

For a start, consumers should ask their investment adviser how they get paid for their work. Do they earn ‘TRAIL COMMISSION’. If they do, then they cannot have the financial well-being of their client as their first priority. If there is ‘trail commission’, DUMP THEM!

Second, clients must understand the relevance of TER/OCF – this means Total Expense Ratio / Ongoing Charges Figure – these are measures that explain the TOTAL cost of charges that apply to funds under management. While most advisers claim this to be an all encompassing fees disclosure, it is not 100% complete but is as close as one is likely to get to the true cost of all management fees.

And the reason that TER / OCF is important is because it is the best available measure of the negative impact on compounding growth potential. By this, I refer to the growth of money potential. The lower the TER / OCF, the faster money will grow. The higher the TER/OCF, the less potential that money will ever grow at its maximum potential.

Which brings me back to Warren Buffett.

Using his ‘passive’ approach, money invested where management fees are say 150 (1.5%) basis points as opposed to say 350 basis points means that on retirement, the average worker could have an extra €50,000, €100,000 or more in their personal retirement fund. Yes, this is the power of getting that management fee to the lowest possible number.

It is little wonder that Mr. Buffett has been so vocal for so long.

After all, why pay a swash-buckling, Mercedes-driving investment adviser when you can get better returns and buy the Mercedes yourself?

Advice – cut those management fees, banish the ‘trail-commission’ and watch your wealth GROW!!!

Financial Education for Future Financial Security

By Frank Conway

A combination of medical science and lifestyle changes has resulted in more people living longer.

Shining a light on financial education for kids with Ollie

Shining a light on financial education for kids

At the same time, more employers have stopped offering defined benefit pensions and replaced them with defined contribution schemes. States have also changed retirement rules resulting in future retirees having to work longer before qualifying for a state pension.

This major shift of financial responsibility from both the employer and State to the individual means today’s generation must develop a much broader and deeper understanding of money if they wish to establish the four pillars of financial well-being; a ‘rainy day’ fund, buy a home, protect their family and plan for retirement.

Defining financial literacy

Broadly, financial literacy is defined as the ability to understand how money works in the world, including earning an income, saving and spending, protecting against risk, credit and debt, investing and making financial decisions.

Equally important is educating young adults on the importance of establishing a personal credit score. This can have significant life implications in housing, access to credit, employment and even car insurance premiums.

Starting early

A 2013 study commissioned by the UK Money Advice Service identified children as young as age seven form life-long money habits. Separately, a 2016 study from MoneyWhizz revealed how adults struggle with important financial concepts, including inflation and compound interest.

MoneyWhizz has developed detailed financial literacy framework segmented for ages 5 – 6, 7 – 11, 12 -14 and 15 – 18. The youth framework sets out both the learning objectives and activities adults should undertake to promote financial education.

The framework is the basis for a new financial education programme from Bank of Ireland developed for kids aged 7-11. The programme uses a mix of stories, promotes critical thinking and includes quizzes and word focus. Critically, teacher / parent worksheets underpin adult / student interaction. During an initial outreach to primary schools in late January and early February, the response from schools right across Ireland has been overwhelmingly positive proving that financial education is valued and needed, even for kids as young as age 7.

A separate programme for secondary schools employs different delivery methods. Class visits and online content has been requested by about one-in-five schools across the Ireland.

Finally, when it comes to adults, there is a major appetite for knowledge, including face-to-face talks.One constant is attendees seeking answers to important money questions. Recently, a tech-savvy individual using an online ‘robo-adviser’sought clarification on the long-term impact of fees (TER/OCF) on investment performance. Despite a wealth of online sources, none answered this important question clearly.

When it comes to financial well-being, one must be informed, patient and humble. In other words, they need to learn about money, they need to plan and grow their personal wealth over time and where they may not understand specific financial issues, they MUST ask questions.

Ultimately, financial literacy empowers people to make informed financial decisions, value the benefits of financial planning,free them to ask important money questions and take greater control over their financial well-being. This is why early intervention is so important.

Frank Conway is the founder of MoneyWhizz.org, a financial literacy initiative based in Dublin, Ireland.

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