White lies beneath

The issue may be passé but the topic is not. After the disastrous “investment” scam that hit the country last year, another one recently made headlines. The infamy can be traced to a professional-sounding “investment house” known as Royal Manchester Five Trading Corp. (RMF).

                The company has bilked—and milked—many unsuspecting investors of their money due to the promise of high returns. The money lost may pale in comparison to last year’s record-holding scam artist Performance Investment Products Corp. (PIPC). Based on a news report from a local major daily, it is estimated that PIPC has made their investors poorer by $250 million.

                It is, therefore, true that for a time, our financial system was awash with cash. But if this amount of money was placed, instead, in proper instruments like mutual funds, real estate, the stock market, the bond market or invested in new businesses, one wouldn’t be surprised at the impact that amount would have made for our economy and our local savings rate.

                Nonetheless, these people who have lost money would have learned their lesson by now, hopefully. There is a saying that money easily earned is money easily lost. The reason is that almost always, when a person gets a windfall, he or she will spend it the very next day. Further to that, when we earn easy money from something, we tend to put in additional capital into it, thereby losing more in the end when the investment turns sour.

                Scam artists come in all shapes and sizes. On hindsight and observation, they probably have a three-step process to get from your “no” to your “yes.” These steps are the setup, handling the objections and the closing of the sale.

The setup

                The setup stage usually takes place in a nice office in nonobscure places, which could include Makati or Ortigas. You have to realize that a scam is still a product that a scammer has to sell. To make it believable, they have to have an office space. How much is rent for an office space if you can scam people of their $250 million, right?

                A scam artist is probably one of the best marketing people in the world (no offense to legitimate marketers, as I am one by education and past profession).

                In marketing there is a basic tenet called the 4 Ps—product, price, place and promotion. For an investment scam to work, its main marketing tool is the product. So the product has to be very believable.

                Foreign-currency exchange is in vogue and these investment shams usually use it as their main product. They package it with above-market yields and a very nice office. An additional product packaging are their very eloquent and well-dressed salespeople. It also helps that they have professional-sounding corporate names like PIPC and RMF.

                There was once a movie by Vince Vaughn entitled The Prime Gig. It’s not an A-grade movie, but it gives you an idea of how professional scammers work.

Handling the objections

                The normal conversation goes about with the prospect, saying that there are so many scams out there. The well-dressed salesperson tells the prospect that they are a legitimate company. They even show their corporate license and Department of Trade and Industry registration.

                These documents, as well as other government documents, will help to solidify the salesperson’s case that they are a working for a legitimate company. What the prospect doesn’t realize is that this supposedly legitimate company doesn’t have the license to sell investment products.

                The clincher in these situations is when they say they issue checks for the interest earnings that their clients get. This almost always sucks in the prospect into saying yes. Further to that, these salespeople would probably show this prospect a check they have issued to another client as solid evidence. 

Closing the sale

                This is the time  the wise salesperson will tell his or her prospect what the minimum investment is. The reason is simple: once this person has sold the idea to the potential customer, it is easier to convince the prospect to commit to the investment.

                Almost always, the minimum investment for these scams seems to run to as high as P100,000. For many Filipinos, P100,000 is almost a year’s worth of salary net of taxes. For people who are in the upper brackets of the socioeconomic ladder, P100,000 may just be loose change. That still doesn’t take away the fact that P100,000 lost is P100,000 lost.

                Another tool these investment-scam salespeople will do is telling this prospect that his or her relative has already gotten the check for their interest earning. More often than not, new prospects are brought into the office by their relative or friend. This pseudo member-get-member system helps to pressure the prospect into investing into the scam.

Knowledge is power

                The Internet may have spawned a lot more scammers. There are those who phish or get your important details by acting as legitimate company representatives or e-mail viruses (I heard the “I love you” virus years ago is going to be made into a movie); but it has also strengthened information delivery for people searching for the truth.

                The Securities and Exchange Commission (SEC), through its web site, www.sec.gov.ph, has an investment-scam checklist on the upper-left corner. For those who want to check on the veracity of a corporation’s registration license, the SEC carries a preamble and tells you that a name listed there as a registered corporation does not mean they are authorized to sell investment products. Try looking up Royal Manchester Five on its search facility, it is there, but as we all know by now, they were not authorized to sell investment instruments.

                Remember that ignorance may be bliss, but not knowing better is your obvious remiss. Take time to do more than just a corporate-name research. You may save your money and sanity in doing so. What is even better is to go to the known institutions instead.

                Real investments may not have guaranteed returns, but isn’t it more fulfilling to know that you worked hard for something than something given to you on a silver platter? And the better question is, won’t it be better to have peace of mind when you sleep at night?

                Sherwin Chan is affiliated with Sun Life of Canada Philippines. He also trades in the stock market and is a member of Absolute Traders. He is also a Registered Financial Planner. He maintains a blog at http://guerillainvesting.blogspot.com. You may reach him at guerillainvesting@yahoo.com for your protection or investment needs.

                Join the 10th RFP Program (April 12 to May 31, 2008). Visit www.rfp-philippines.com or inquire at  info@rfp-philippines.com/Tel. No. 634-2204.

The National Food Summit held at the Clark Free-port Zone last week was called to discuss policies and programs, attract bigger investments and launch development programs that would impact favorably on food supplies and prices amid a looming world food crisis.

These days, pigs have reason to be very angry with humans, especially the Filipino variety.  Pigs are bred and mercilessly killed for food. No feast is complete without a lechon as centerpiece. At the same time, some of the worst human characteristics are ascribed to pigs.

Had we understood what the Japan-Philippines Econo-mic Partnership Agreement  (Jpepa) was really about, seeing it as a response to the failures of global trade initiatives, then we might not be the pathetic victims we currently are to the food crisis that afflicts us.

Personal Finance: White lies beneath

The issue may be passé but the topic is not. After the disastrous “investment” scam that hit the country last year, another one recently made headlines.

The Entrepreneur: Rationalizing incentives

WE pay a big price in encouraging investors to put up factories and operate industries in our country.

Coast-to-Coast: Tempest over coal and power

Ay, naku! What a cursed state we are in.                

This is the common plaint we have been hearing as we get hit or threatened to be mowed under by one national malady after another for days on end. But are these plaints for real or just tempests on a teapot?

Reflections from the Mirror: Profiteering is inhuman

Hoarding is a dastardly act that benefits only the capitalist and displaces thousands of consumers. The capitalist has the money and the motive to amass stocks in order to manipulate prices to take in enormous profits, to the detriment and disadvantage of the consumer who shoulders the gluttony of the capitalist for more and more profits.