The Sadness that is the David Ross Saga

It would be easy to condemn the man. He has operated in our city in my profession and stolen millions from trusting clients.  His anxiety and worry must have been almost unbearable as the self evidence of fact over fantasy began to dawn.  Living a lie would not be easy and it will indelibly affect families for generations.  His and his unsuspecting clients.

But I can understand the human frailty that is ego and avarice.  None of us is exempt but when it comes to people in a position of trust we need methods to manage the temptation of greed or self importance which can come with ‘success’.  As a nation we are less than humoured by people of arrogance, however David Ross was more a loner.  There was no team.  No governance.  No board.  His motivation to continue the façade (investment performance) was most likely closer to home – family and friends and more especially referring clients. It was easier to tell a lie than to tell the truth and suffer the ignominy.  Hoping of course that he could correct the original sin through superior knowledge of the ‘market’ and future timing decisions which could recover failed or non-performing securities.

The ‘market’ can be your friend or your Achilles heel.  In David Ross’s case it was the latter.  But it needn’t have been.  Since World War 2 we have suffered 13 Bear markets.  Roughly every 5 years the broad equity markets around the world will decline by 20% or more.  The average is around 30%.  The GFC was a whopper at over 50%.  But in the 5 years since the Lehman Bros collapse, which precipitated the global financial crisis, the equity markets in most countries have not only recovered – but surpassed pre-crisis highs.  The NZ market alone has soared by over 20% per annum over the last two years.  The S & P 500, the index of the leading 500 US companies, is now measured at 1,791.  It was 1530 in 2007. However, simply not telling the truth was not this man’s only failing.  He obviously became convinced that he could pick equities (share market winners) and time the market.  He didn’t have that misapprehension on his own.  NZ abounds with flawed self belief from fund managers to financial planners who think they can out perform the market.  The difference being that fund managers are measured and monitored – their performance is public knowledge and financial planners predominantly use custodial platforms which prevent the sort of ‘personalised performance reports’ that David Ross’s clients would have been receiving.  If at all.

Having been in the financial services industry/profession for nearly 40 years (from banking, to insurance, to funds management, to financial advice, to financial planning), I have encountered many similar circumstances of human frailty.  From board rooms to bar rooms, no one is exempt from temptation.  In this situation the size of the fraud was so large and the knowledge so public there was no ‘hiding the fact’.  I’m sure the ambitions of David Ross were never intended to hurt his family or the families of clients from his failed investment advice, but what I cannot condone is that he used such a flawed process of advice and then felt it necessary to protect his self esteem through deceit.

All successful long term investing is goal oriented and therefore planning driven – whilst all unsuccessful investing is market oriented and therefore performance driven.  It is much harder for a financial adviser/financial planner to take clients down the planning route when one’s previous career assumptions have been ‘performance’ and ‘timing’ orientated – but in my opinion it is the only true process.  The problem is it means that marketing and prospecting for new business is a constant requirement as most ‘investors’ whether young or old are looking for the next Xero, Twitter or Apple.  Unless the learnings of the GFC are better understood the public will be continually misled by promises of product performance – whether from an institution or an individual – that is the unfortunate on-going sadness of the David Ross saga.

The information provided in this blog is not intended to be a substitute for professional advice. You may seek appropriate personalised financial advice from a qualified professional to suit your individual circumstances.