Friday, December 14, 2007

Money Manager's first step gives investors the middle finger

Today's column time warps back to 2002 when I started a thread on the financial forum Sharetrader. The thread was titled "Are Money Managers Dodgy? I cant find it on the site now as I suspect the owner of Sharetrader, Tarawera Publishing, has removed it due to the slagging off of Doug Somers-Edgar, the owner of MM, through a family trust.

The finance biz is very small in New Zealand and people don't like to step on toes, even though they should, should they want to continue to do business with each other.

Flick back to today and we find the on-going saga of Money Managers and their "First Step" product seems to have finally come to a soggy mess after being closed down in 2006.

Money Managers have told over 7000 investors they are unlikely to get all of their money back after First Step was liquidated, putting around $150 million of total funds invested at risk of being flushed away.

The NBR had this to say about First Step back in February 2002:

First Step's own financial statements showing related party lending at 29.58%.
There is still no information on where the money finally ends up, what the rate of return is for those related parties, and the level of risk to which First Step investors are exposed.

Among the questions Mr Somers-Edgar has refused to answer:

Could that expertise not be provided within First Step, thereby providing more transparent accounting for funds?

Are the returns in line with the level of risk investors are taking?

Why will Money Managers not open up to independent scrutiny?

What is the total "cost on funds" (how much money the investment is generating compared with how much investors are getting back)?

What are the total fees charged?

The National Business Review has revealed how the First Step structure puts walls between investors and their money, with no clear account of what happens behind the walls.

First Step has had a chequered disclosure history; the Securities Commission suspended its prospectus when it was first issued in February last year.

Presumably Money Managers didn't inform clients of the concerns of the likes of the NBR and myself and continued to take in client's funds in a dishonest, calculated and deceptive way.

This part of the NBR article is revealing:

First Step's own financial statements showing related party lending at 29.58%.

One would have to ask, if there is interrelated lending from First Step, as there is with every other "product" Money Managers peddle-Doug is known as "Mr Clip, Clip" for every time there is an inter-company loan or transfer he clips the ticket with a fee-why don't the more profitable areas of the business lend money back to First Step to bail out Money Managers 7000 clients?

I know it is a dumb question but it had to be said.

I urge anyone considering investing in any of Doug Somers-Edgar's companies to take a deep breath, Google his name and see what you come up with and then make your decision.

What has Somers-Edgar been up to lately?

Doug has mysteriously disappeared from his former high profile, since stepping down from Money Managers in 2006 but seems to have been busy suing people for critiquing his investment style.

From 27 June 2004, Somers-Edgar-related CTT companies in receivership (CTT Finance Holdings, CTT Financial Services, CTT One, Dental Finance, Paragon Factors and involved in numerous other liquidations of his own, related and other parties companies

Owning a dodgy Ginseng business.

Related Share Investor Reading

The "New" Money Manager's Investment Vehicle still tainted by its past
Don't forget Money Managers
Orange Finance collapse should turn investors red, with rage
Money Managers First Step saga: 3 Story wrap

c Share Investor 2007 & 2009

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