Expect Bernie Madoff's multi-billion-dollar client bilking to be fresh on the minds of the investing public again as the first of two television movies about the corrupt financial adviser starts Wednesday night.
Many advisers say prospects and even some clients ask how they can be sure that their adviser can be trusted, and isn't running such a scam as Mr. Madoff, who today sits in prison for operating a giant Ponzi scheme that defrauded more than 4,800 investors.
“Madoff caused people to ask a lot of questions,” said Nathan Paulson, founder of Paulson Wealth Management.
Mr. Paulson opened his firm in 2009, just months after Mr. Madoff was arrested, and the spectacular fraud was at the top of people's minds.
Prospects regularly asked: “How do I know you're not the next Bernie Madoff?” Mr. Paulson said.
The airing of
ABC's two-part “Madoff” this week, which stars Richard Dreyfuss, as well as an upcoming HBO movie on the events that features Robert De Niro, could remind an already distrustful public that investing with the wrong financial adviser can ruin lives.
(More: 6 biggest financial villains portrayed by Hollywood)
BAD BEHAVIOR
A trailer for the film shows a squirrelly-looking Mr. Dreyfuss describing Mr. Madoff's manipulative approach: “Want to know how to get people to trust you with their money? I'll tell you right now, you present it as an exclusive thing … Nothing on earth makes people want something more than telling them they can't have it.”
Other recent depictions of financial advisers in the movies and on television aren't doing much to help financial professionals' image, either.
The recently released movie of the Michael Lewis book “The Big Short” shows big Wall Street bankers causing millions of people to lose their homes and livelihoods when the U.S. housing market crashes. Before that, "The Wolf of Wall Street” detailed the $200 million securities fraud of Jordan Belfort and brokerage Stratton Oakmont.
(More: 4 adviser takeaways from "The Big Short")
On television, Showtime's new series “Billions” features Damian Lewis as an ultra-wealthy, corrupt hedge fund manager and HBO's “Ballers” shows Dwayne “The Rock” Johnson as part of an advisory firm with questionable business practices. And in the USA Network series “Satisfaction,” the main character transforms his financial advice firm into an escort service by the end of the second season.
Part of the issue is that stories about bad behavior typically make for better entertainment than those showing the good guys.
“There hasn't been a movie in my memory that portrayed our industry in any kind of a positive light,” said Matt Hall, president of Hill Investment Group. “There are many things going on that are exciting and positive, but people like to watch shows with villains.”
RIGGED SYSTEM
Fewer prospects and clients today ask Hill Investment Group about Mr. Madoff than several years ago, but their advisers still see an undercurrent of mistrust “that sits right beneath the surface,” he said.
“These stories make people think the system is rigged in a way that can really do them damage,” Mr. Hall said.
(More: Third Madoff employee avoids prison sentence )
Ted Jenkin, co-CEO of Oxygen Financial, said because the industry is so fragmented, when anything financial is portrayed negatively in the movies it “causes more speculation about the motives of people that work in this industry.”
“Even though 99.9% of the individuals are high integrity individuals, money is such a personal matter for families that any level of negative news heightens the sense of future investors,” he said.
When faced with questions about how Mr. Madoff was able to defraud so many clients for so long, many registered independent advisers typically explain the importance of having a third-party custodian and in many cases a separate record-keeper, as well.
“I describe the three different points of contact, so if someone doesn't believe my statement they can log into the custodian and make sure the numbers match up,” Mr. Paulson said.
