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Days when anyone could claim to be a ‘financial adviser’

Irrational exuberance: the late 1990s were a time of widespread investor complacency and little to none in the way of investment regulation in Bermuda

This is part two of a four-part retrospective series by Martha Harris Myron, author of the Moneywise column for 25 years

We Bermudians tend to suffer from the extremes of a bipolar social syndrome. At times, we’ve committed the national sin of arrogance, self-confidence, and complacency beyond the realm of financial reality.

At other times, as a collective, we still spend inordinate amounts of energy on our faults, our national insecurities, punishing ourselves, while beating everyone else up, verbally.

We are at a critical juncture as to what we need to be as a country.

We face, individually and collectively, a pivotal decision for who we want to be as a people. And the external and internal influences are overwhelming.

As we head further into this millennium, it is worthwhile to consider again where we were, and what we accomplished financially as an international finance centre, where we are headed, and how we should carefully assess the performance of our leaders in making thoughtful, appropriate policy and financial decisions for the good of the country.

I’m just a humble writer and can’t begin to provide illumination on public policy, but I can discourse on financial observations that I have made in writing this weekly column since March 5, 2000, more than 1,500 articles each of 1,000 words, published in Bermuda and the international press.

Looking back

Twenty-five years ago in 1998, after more than 37 years abroad, I returned to Bermuda with my dear husband Paul to care for elderly parents.

At “de erport” arrival, with the enthusiastic “welcome home” greeting, I burst into tears, having never thought I would ever return and yet, here we were.

Paul, an internationally recognised, registered pharmacist, and pragmatic, compassionate person was hired almost immediately at Somerset Pharmacy.

As a US CPA, CFP with a US FINRA investment securities licence, I went to international investment banking.

First impressions were overwhelming. Bermuda, a tiny dot in the Atlantic, host to a cutting-edge global insurance industry, was operating in high gear at a level of finance activity with no comparison to, say a small US town.

The financial-services industry was accelerating, too, although the local regulation of the investment advisory business was many years behind the US regulations established more than 70 years earlier.

This was apparent when then head of the Bermuda Stock Exchange informed me that I did not need a securities licence to sell investment products or provide investment advice.

Bermuda foreign exchange controls were lessened, or just ignored, and as access to outside Bermuda investments became available, local banks and investment firms started creating walk-in investment financial advisory centres for community participation.

Personal investing here in Bermuda for the ordinary person became new, exciting, fashionable, finally affordable and irresistible.

Everyone’s friends were doing it. It was a game.

The tech dot-com zoom in capital markets, particularly the US and Asia, were roaring and touting huge gains. Remember those days?

Almost mass hysteria

People would call on Monday after weekend parties to put chunks of money in some hot investment that their friend recommended, or fire you because another firm’s mutual fund was getting 80 per cent return per year and your firm’s fund was only performing at a 25 per cent rate.

Early one morning at an investment firm, I arrived to find a highly anxious gentleman hanging off the door like Spiderman.

“Where’s my broker,” he said frantically to me. “I need to sell some stock ASAP.“

“He’d better be in soon, I put £60,000 on this UK penny stock and it’s dropping like a stone!”

Never heard what he took for a loss, but you can bet it was substantial.

March 2000 was still a year or so away!

Documentation was slim to none for most security products.

In spite of all the fun and hype, although I’ve never considered investing such, there was unease.

Mutual fact sheets were non-existent; investing clients might receive a single page, sometimes copied from magazines.

Newspaper ads touted a mutual fund’s 40 per cent annual gains, without mentioning that the prior six years were losses, for example – a breach of fiduciary duty and false advertising punishable in the US securities industry.

There was little detailed investment information, such as fact sheets, prospectuses, investment policy statements, comparative performance to other similar funds, capital market identifiers (CUSIPS), risk measurements, leverage, cost to investor, etc. Inquiries for said information were met with blank stares.

In those early days, I only saw one company, Orbis Investment Management Ltd, produce fact sheets equal to, or truly better than the US professional investment standards, an amplification of the impressive investment track record.

It was very hard to find any verifiable detail on security products, although eventual digging on Bloomberg would generally turn things up, but almost no individual investors had access to this large financial institutional product.

Fiduciary standards were not defined.

There was little or no full disclosure of financial salesperson’s credentials, compensation, or the business model philosophy of an investment firm.

No conflicts of interest disclosed, such as additional discounts or extra compensation for selling a specific product.

The people selling the products were hard to define.

Who they were, what type of background, qualifications, licensing, fiduciary standards?

One minute an individual was a project manager, next an investment adviser in a highly complex environment. Thus, the fully qualified investment professionals, such as Certified Public Accountants, Certified Financial Planners™ or Chartered Financial Analysts with mandated fiduciary responsibility to clients were little differentiated between those holding out as “financial advisers,” an absolute misnomer.

But it didn’t matter – then!

Bermuda was embracing the internet rapidly. Individual mass access to computers for the individual was increasing also; at last, access to the big investment world.

It wasn’t an entirely negative picture. Everyone was trying.

The local investment industry was in the toddler stage but stepping determinedly forward to local population investment inclusiveness almost equal to that experienced by people of significant resources who always had access to outside investment services.

This was a good thing!

Next week, part three: no one ever cares about background when times are good. Then came the dot-com bubble crash in March 2000.

Martha Harris Myron is a native Bermuda islander, a presenter, author, international finance columnist, YouTube creator The Bermuda Islander Financial Literacy Perspectives network. Subscribe to the Bermuda-Bermy Island Finance Blog http://marthamyron.com. Contact: martha.myron@gmail.com

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Published September 30, 2023 at 7:30 am (Updated October 02, 2023 at 8:20 am)

Days when anyone could claim to be a ‘financial adviser’

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