Massive shortfall of funds at Ross Asset Management

PwC said: “There is a significant gap in the identified market value of the Group’s investments as against the amounts reported in investors’ portfolios.”

That would have to be the understatement of the year....

The FMA has got a nerve trying to take the high ground on this. A scam appears to have been going on right under their noses.........just the thing they were set up to prevent the first place !!

You advise Towers benefits, well I have/had been with Tower for 24 years to have a sharp kick in the knee caps with a property and having my insurance suspended because house has not sold.
Then having to away equivalent to four days on the telephone to fine this out
all the yrs of taking my money over 17 investment properties, no loyalty to the customer when is it needed. I feel for the people in Christchurch fighting for what is lawfully theirs.

For years I have been in the insurance industry and hardly heard of anything dodgy. Then I had to join the club known as the FSPR

Good to see fraud is alive and well in this country!!

Hearing now that the company's tax returns to the Inland Revenue appear to be two years in arrears. This raises serious questions as to whether the IRD should have made the FMA aware all was potentially not well at Ross Asset Management ages ago. A red flag surely should have gone up you'd think?

$400M+ under management and two years in arrears on your company tax returns.....

My biggest concern is RFA providing advice to KiwiSaver clients..........

Perhaps it's time that the FMA looks to put rules in place to ensure that all fund managers, investment managers, asset managers etc are subject to internal controls audits! External administrators are usually subject to these to keep their clients happy. You would think that internal administration should be subjected to the same scrutiny.

@amused: wondered if its got to do with the privacy act? you know something is dead wrong, but cannot say it otherwise get punished.

@andrew: it's the adviser, not the title. it doesn't matter if the adviser is an AFA or RFA, if he's a crook, he's a crook.

The person attaching blame to the FMA should take a deep breath before rushing into print.The FMA was set up a year ago and this scheme has been running since the 1990s.To blame them for a scam going on under their noses is a bit rich when many wealthy investors were prepared to entrust their money to Grant Ross.They had to be wealthy as the entry was $250,000.
And they were getting returns at times of up to 37%. If it sounds too good to be true it obviously was.One would have though a prudent investor would have made a few checks.After all one can't expect the govt to hold our hands for ever.

And you guys wonder why us New Zealanders invest largely in Property both Ressie and Commercial!! the financial services / advisory / funds management is a joke!! glad I'm not tied up with you lot!!

The key thing here is the absolute ignorance of large numbers of investors who seem to be blissfully unaware of prudent management and supervision of their wealth by a third party. Not to have regular reports and being told they have returns way above the norm should have quite quickly sent alarm bells ringing.When will they learn?

@ w k: Yes, I am sure the privacy act will be used as an excuse by IRD no doubt (or some other BS reason) to explain why they didn't drop a dime to the FMA. Expect to see some serious questions asked in Parliament on this matter.

@ Andrew: what w k said. Regulation has not changed anything. If an adviser is an RFA or AFA has no bearing on whether he/she is going to act unethically.

Hopefully none of the investors were given advice to sign up with RAM!!

With reference to Bob's comment, of course there have never been any property related scams in NZ, so you're quite right.

Well, apart from Blue Chip, Bridgecorp, Capital & Merchant......just Google 'nz property scams'.

Ross Asset Management is not representative of NZ fund management or financial advisors any more than Mark Bryers is representative of NZ property investment.

As per Anon re Bob. I am sure the 60,000 properties involved in the leaky building scandal are regretting getting tied up with that lot.

It is the NZ shell be right bro attitude.

Hey Bob: We're not all like that. In fact many of us played an active role is reducing the harm done by the finco collapses.

Property isn't a land of gold and sunshine either but it suits the dyer who's willing to bet the family silver and home on one horse. And the types who think they know everything. Like Bob.

HA HA HA, ohh you guys!! - comical wee bunch. I'll give you my 10c story.

I'm 41 and have in the past visited financial advisers and asked their worldly opinion. None of which made any sense - so I stuck to my own strategies and it has worked for me. I started when I was 19 at Waikato Uni - I started with 10k I had earned from picking up Hay in the Summer and brought my first house in Hillcrest Hamilton, rented a few rooms out and got on with my degree - that was over 20 years ago now.

As I sit today I have a property portfolio in excess of $4,700,000 with an LVR currently sitting 18.7% - about to be 0% as I am about to sell a property on the North Shore that is surplus to requirements - do the maths Stan and Dirty Harry and Anon - not bad, and not a financial adviser in sight.

Why would I be so stupid to even think about investing in a mezz finance company like the aforementioned Bridgecorp, Capital and Merchant and others - do some research and you find everyone at the top of those trees stunk like last week's fish carcasses - WHO was stupid enough to lend them money - OHH that's right, Financial Advisers - silly me!!!

So to the three fellas here bagging me out and bagging property out - I will raise a couple of lazy social fingers in your general direction whilst I sip on my Steiny Pure at my beach house in the Bay of Islands - that, yes before you ask - is Debt free!!! nuff said

Of course, we can all get rich selling properties to each other!

Let me get this story straight. As a 19 year old student you went to a financial adviser and, despite not understanding what they were saying, arrogantly, though typical of 19-year old students, decided you knew better and were just fortunate enough to buy property at arguably the best time in history. Now you claim this experience proves property is the single best investment back then, right now, and in the future, and (through some brain-fartian logic) that the RAM fraud discredits management of all other asset classes while the long list of property implosions reveals nothing about that asset class.

Now, which is more likely? (psst.. I reckon its got to be B. You know why? Because if A was true, $4.7 million would represent an abject and embarrassing failure.)

A) as a 19 year old student, you had the foresight to accurately predict asset market behaviour, you had the clarity of vision and knowledge of everything from demographics to technological advances as well as a keen sense of politics as it pertains to town planning, and used these magical skills to construct a 22 year financial plan that you have followed to the letter right up to today.

Or B), as a 19-year old you invested in the only asset class you really had any connection to and now as a 41-year old you are ignoring the potential risk of your previous actions and claim your good fortune was purely the result of good judgement.

Ah risk, this is probably one of those things the financial adviser talked about that didn't make any sense to you. It probably still doesn't. If you stay true to form you will claim your financial plan didn't have any risk. Although its possible you might claim you understand risk, and that's why you diversified by buying properties in different regions!

There is much good stuff written by all commentors and as a reader & formerly both a top financial adviser(NZ) and property investor, I can see both sides.

Bob' your comments about how well you have SAID you have done certainly READ good, however, it is only words about what you have SAID.
Your SAID property portfolio would obviously have originally been nearer the $7 or $8 million mark due to having dropped in value with all property in the recent financial debacle that virtually no-one was immune to, however, the (circa "said) $5 mill is still a good "nest-egg" result...good on you if what you SAID is true.
I have to assume by the way that you simply made a typo in your haste to create your comment,,,and actually meant you BOUGHT your first house...not BROUGHT it (on a truck)??
I still raise (property gurus and financial-planners alike)two main points relevant to this recent Ross AM thingy.

1. Why, if there is now such an investor protection called regulation, is there still a regulatory thing called a prospectus, which in turn contains an added protectant called TRUSTEES, where it(the prospectus) carries no regulatory element....ie: we are still never seeing any TRUSTEE being publicly quizzed (in court or otherwise) about such things as satisfactory reports, tax returns filed (not 2 or 3 years late),and ROI's which are very easily identified as "ponzi" or not each quarter (not bi-annually)???
Why are directors the only ones taken to court...and not the people who are supposed to be of TRUST,,, subsequently called TRUSTEES???

2. Bob, and all you financial-planners.
Do you still not come clean with the recognition that there is no such thing as INFLATION (except as a word).
The truth is that what we are brainwashed to believe is "inflation" is actually the end effect of the truth that it is the process of our "bosses" eroding the value of our currency...that is what we believe is "inflation.!"

Bob,...is that more why the likes of Blue Chip were able to suck people into their version of good investment?
Remember...how you property-only people made sweeping statements that houses doubled in value (INFLATED)each 10 years?
Only dummies accepted that false advertising over the TRUTH......being that over each 10 year period the RB managed to halve the value of your currency (that you invested into houses)??
They did that simply by printing twice as much money into circulation in that 10 year period..!
Rob Muldoon even let it "out of the bag" back in 1984 when he made the public statement that he was going to devalue our (NZ) currency at the rate of 1% per MONTH..(that was another way of saying he was going to create INFLATION at the rate of 12% per ANNUM.

Once you understand the difference between "devaluation" (of currency) and "inflation" then both solely-property investors, and diversified-portfolio financial-planners alike will surely take a very different approach to their respective "investment" philosophies,and I for one can remain in the camp that does not believe the "brainwash" that I can pop out and buy a house for $300,000 dollars today....and sell the same house in 10 years for $600,000 "and buy TWO!"

Secondly, I have been told that no-one in the FMA came from any financial services type of background, and must therefore assume that they are just an added type of "people-police" and are simply not as on track as you all may be led to believe.

Lastly, the Ross A.M. debacle of present is not going to be the last, as I went to print on in recent years.
As you have said "Amused"...belonging as an AFA or RFA will prove that they are not parts of the regulatory protector you may get brainwashed into thinking...people are people and you can never change that fact.

All the original Finance Companies had a (regulatory) prospectus.
Each prospectus had a TRUSTEE.
What on earth was the role of those TRUSTEES (other than to provide a form of TRUST and regulatory protection to relevant investors)?
Yet no trustees have been held accountable before any court??

Bicker between yourselves if you wish and both can pretend that each has the only answer to investment philosophy, however, keep an eye on the "truth" of how and why you invest (or advise so), because 37% is not necessarily a Nigerian scam or ponzi scheme, and most of the world's truly wealthy would not even bother to get out of bed for such returns...believe it or not?
It may all be down to how you may have already been conditioned?
Hope I didn't leave any typos?
M.D.

Let me work though this - Kimble - no not at all, I didn't even know what a financial adviser was at 19 let alone actively trying to find one, it was only latter in the process did I have a number cold call me asking to come and see me - I gave one of them the opportunity and didn't see the need.
Don't get me wrong, I just couldn't get my head around an old bloke in a Cardigan that had the pungent aroma of last night’s Port Royal rollies and Gin, turning up at my house, after hours, in a 1984 Toyota Camry. That was my first experience of an adviser - who kindly obtained my number from my mainstream bank at that time. I changed Banks the next morning.
Hey - and don’t get me wrong - he may have been a nice bloke and very clever at his job, but not for me. I’m not claiming anything Kimble - I'm just pushing back on the nice gentlemen above who bagged out my decision to invest in property.
I wonder if either of them own a Camry, hmmm food for thought. Your right too in terms of a 19 year old having very little foresight and throwing my hard earned cash in the only asset class I knew I needed - a home, I could have of course invested that 10k in ciggies, Cheap jugs of beer, Georgie Pie,condoms and rent like most of my mates did - but I preferred that they did that and paid my mortgage whilst I studied – and I did rent free for 4 years, ssh don’t tell them, one of them is even the Chief Economist for the aforementioned Bank now!!
Tisk Tisk Kimble - Risk, I'm fully aware of, and please good sir you haven’t completed a needs based analysis on me yet to determine my Risk profile that will allow you to make such sweeping statements.
Well researched and sourced Property- whilst has proven to be a stable defense in my portfolio producing stable yield and great Cap growth due to the nature of my timings and entry into this asset class - it is not my only investment class, that would be foolish, never assume Kimble as we all know what happens there. Yes, you make an ass out of yourself.
Michael D – you do write and make some very good points – well done! However my I return the Grammar lesson good Sir, My comments “Read Well” not “Read Good” just so we are clear. No I never reached the lofty heights of $8mm in property – come one Michael D - your name really is Bernard Hickey, you live with your Mum and you think property will de-value by 60%, no wait 45%, no hang on 30%, no alright maybe 15% Damn it!! Why isn’t doing what I said it will?? MUMMMMM!!!
All I am saying is that Property is well entrenched here in New Zealand, the population understands it, excepts it, and TRUSTS it. As soon as the mainstream Financial Adviser Market WAKES up and understands this – then well we can all move on. NO it shouldn’t be your only Asset Class, that is Stupid, and NO it is not my only Asset Class. I have a very diversified portfolio. I research and I research, then I research some more – the good thing is I am not swayed by Commissions, Golf Trips, incentives or other such monetary gains earned by way of an introduction of an individual who actually strives to achieve a greater wealth creation plan without a Lambrey like person in sight. Have a lovely day Gents

1. Those guys weren't bagging property. YOU called funds management a joke based on the Ross fraud and said people were right to only invest in property. THEY showed that property is not immune to fraud, in fact it was much more prevalent.
2. A risk profile is to gauge someones tolerance of risk. You don't do a risk assessment to determine if someone understands risk. The weight of irony of that being your response to the suggestion you don't understand risk almost broke the internet.
3. Apology accepted.

I'm almost disappointed to have been spared in that lengthy rebuttal.

20 years ago turning up in a 7 year-old camry was as respectable as doing so today would be. I don't smoke or turn up smelling like gin, and I definitely don't wear a cardigan.

And I rarely go to clients at night.

You could have invested your 10k in many different things, but you went with the only thing you knew, and I would guess your parents knew.

Yes getting your own place is a sensible thing to do but that is not investing, that is housing yourself. Getting your mates to pay your mortgage/rent is using your house cleverly. Many do that.

So far I remain unimpressed by the pious rantings of yet another property investor who can't tell the difference between housing and investment, and likes to take a lot of credit for their lucky outcomes.

Making large (unexpected) capital gains through the 2000's while remaining either ignorant or at least naive to the risks is not the result of astute investment, it was pure dumb luck.

Ross was a fraud. So were Hotchin, Petricivic et al from the finco debacle. So was Buddle. We all acknowledge that. Most advisers now charge a fee, not a commission for investment, fully disclose their remuneration up front and genuinely care about helping their clients move in the right direction.

Perhaps Bob prefers not to work with one, but that doesn't make it OK to come on here and pare us all out for the criminal activity of one person. It doesn't make it OK to make sweeping insinuations about the honesty, the integrity and the motives of advisers at large.

Bang on Dirty Harry - to you sir I do apologise, the rantings of a mad man - that being myself, need to be taken too seriously - indeed I have been fortunate in my timings, and I appreciate that. I also have been burned in other facets of my investment processes. Again - I'm not lobbing grenades into the advisory space - just being a bit of stirrer is all!!