The Wolf of Wall Street created quite a buzz when it was released in 2013. Not surprisingly. It is a fast-paced, powerful and aggressive movie based on the exploits of Jordan Belfort, enacted brilliantly by Leonardo DiCaprio.
My name is Jordan Belfort. The year I turned 26, I made 49 million dollars, which really pissed me off because it was three shy of a million a week.
That’s how it began. The story of a convicted white-collar criminal who rode high on drugs, money and women. Belfort used his brokerage firm to swindle investors through a combination of securities fraud, market manipulation and money laundering.
While the movie does not venture to portray the millions of victims, it did appear that the ending was an insult to them – when the real Belfort – now a motivational speaker and author, actually makes an appearance and introduces his muse, so to speak, on stage for a final scene. Not surprisingly, the movie sparked bitter controversy in the U.S. between the association representing more than 1,500 victims defrauded by Belfort and the director Martin Scorsese.
But beneath all the debauchery, decadence, and, of course, rampant obscenities, there are plenty of lessons to be learnt – ethical, moral and financial.
Valerio Baselli, Senior Editor EMEA, at Morningstar lists down some.
Be careful who you entrust your money to. Who are they associated with? There are serious professionals among the smallest firms, just as there are bad apples in companies with a great tradition.
In an interaction in Australia in 2014, Jordan Belfort said this: “I would never give my money to a no-name brokerage firm or a financial adviser who was not affiliated with a major company. I'm not saying there aren't crooks in big companies, but to go with someone on the basis of a phone call or someone who's operating from a business that's very recent, you're taking a huge risk. That, alone, is a tell-tale sign.”
- Do not stop at their own references.
If you decide to work with a little-known broker or consultant, you need to at least be sure you can trust the person managing your money. You cannot stop at the references passed by them directly. Get at least two or three independently.
- Information on the firm must be solid and clear.
Before taking a decision, it is always good to do some research. Those who work well do everything in the open and it should not be difficult to retrieve information or confirmations on the way they behave and do business. Those who advertise only on performance but remain opaque about everything else, starting with their investment process, are suspicious. If they have even a partially shady reputation, run the other way.
- Ethics: If you lose it once, you lose it forever.
When it comes to money, there's no in-between. If you pass the limit once, there is no turning back.
In his interaction in Australia, he was explicit: “Either you're lily white, or you're not. If you cross the line once, you get a taste for it. You can't say: Oh, I'll make my money and then I'll become a pillar of society. It doesn't work that way. I didn't start out ethically bankrupt. I sold my soul a little bit at a time. I crossed over to the dark side through a series of tiny imperceptible steps.”
- Beware Of 'Exclusive Groups'
The oldest technique in the world is to flatter: “my clients are exclusive, but you can be part of them.” Bernard Madoff did exactly that. And paying to enter an exclusive group is already a red flag.
Belfort calls this the oldest hustle of all – the classic con. “You wanted to be in Bernie's club and if you weren't in Bernie's club, you were "less than". People clamoured to give their money to Bernie Madoff. If you asked questions, he said: No, no - take your money back."
- When it seems too good and too easy, it often is.
Everyone is looking for the easiest and shortest way to reach their goal, and finance is no exception. When someone offers you a method or conditions that are too good to be true, you need to ask yourself twice as many questions and do twice as much research.
“You give your money to Bernie Madoff and you get this amazing return year after year, in up-markets and down-markets. Bernie was a very clever crook and he played on the system like no one's played it before,” said Belfort.
But how could Madoff do it? Because people enabled him, as Belfort rightly says.
“We all want to believe that there's something out there that's better than reality, that there's a fast way, an easy way, that there's something that's too good to be true.
There is nothing that's too good to be true.”
