After ending on the term ‘celebrity risk’ last week, it seems like a good place to start this week.
Now celebrity risk wasn’t a defined form of risk until now, so I’m happy to define it as, “the risk of using any financial product endorsed by a celebrity”.
When it comes to financial services the most important aspect for consumers, especially older consumers, is trust.
And when it comes to financial companies or services that are marginal or unknown, the best thing to smooth out concerns is to borrow credibility from a well-known and respected celebrity.
In the case of Gippsland Secured Investments who recently ran into difficulty, they borrowed their credibility from Dennis Walter.
Walter is a well-known radio host on 3AW in Melbourne, previously read the news in regional Victoria, does quite a bit for charity and is a popular singer with older generation.
And I assume that was the target market for most of Gippsland’s investment products, similar to a bank deposit with a slightly higher interest rate.
Unfortunately, in the absence of better information, people will take the word of a trustworthy celebrity and believe that celebrity wouldn’t put their name to anything remotely dangerous.
The reality is, most celebrities wouldn’t have the faintest clue on what they’re selling and are reading from a script.
As many retirees found out in 2005 when reverse mortgage company, Money for Living went into administration.
At the time, Money for Living was being endorsed by two celebrities easily recognisable to retirees, actor Paul Cronin and Olympic swimmer Dawn Fraser.
After homes were lost and the money dried up, it was later revealed the company was being run by a convicted fraudster.
These are only two of numerous celebrity financial endorsement clangers around the world.
Always do your homework and ask yourself – if an investment needs a celebrity to sell it, how reliable could it be?
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Looking for the top financial adviser in Australia?
