What emotion drives us at times when we are vulnerable that often leads to financial disaster? If you said fear, you would be almost right, that is secondary. The emotion that scammers and promoters of defective products play on is greed.

The poor, which is the majority of us, often have fantasies of a windfall. And when that fantasy is presented in writing (by email), as far-fetched as it sounds, we want to believe it. Someone in the world has written to us to tell us that: a) we can help them transfer their millions to our bank account since they are receiving an inheritance, b) we have won a lottery and we only have to pay a few installments to receive it, or c) there are some actions of small American businesses to buy that will prove profitable.

As we’ve seen lately on Australia’s 60 Minutes and Current Affairs shows, these kinds of email scams are run by nasty guys in Nigeria, Thailand and other poor nations, sometimes with links to Australia.

A trap for retirees who love fixed interest

Another type of cheat is disguised as a good investment. I am referring to the promoters of unsecured notes and mortgage obligations that offer a high-yield fixed rate. You may have read about the collapse of Westpoint, Fincorp, and the Australian Capital Reserve. There are still many other similar companies operating in Australia, all without a Morningstar rating.

The product looks like a time deposit and is promoted as a “bricks and mortar” investment. But there are still retirees who know little about the product they are investing in. They also don’t realize that their investments are barely keeping a very poorly structured company alive, and that advertising takes a quarter of all profits just to attract more money to keep it afloat (as was the case with Fincorp before it was founded). would sink). Fincorp’s unsecured noteholders are owed a total of about $23 million, which is gone, and secured noteholders are owed a total of $178 million, and they can see about 30c to the dollar. .

While $1 billion of investor money has gone down in the collapse of the three companies, what about the remaining $8 billion in subprime liabilities? If ASIC clamps down on the promotion these other companies do, then they might as well fold like a house of cards.

While ASIC’s FIDO website has warnings about all sorts of scammers, schemes, and unsafe investments, sometimes these unrated companies (with their TV and newspaper advertising) and financial advisors with greedy pockets grab investors’ attention first. naive.

Do not let that happen to you. Be sure of what you are investing in by doing your own research.