Even most people who do not stay abreast of the investment industry will have heard of Bernie Madoff. He was the CEO of a company that scammed millions from wealthy investors and celebrities. How did that happen?
Never underestimate the power of “missing out on a good thing”. We all fall into it at some level. When your child says “everyone at school is getting those running shoes” it usually really means just one or two friends who are in your child’s direct peer group. It becomes a fixation, and they want them too….or what will happen? Will they be ostracized? Not likely. Will they lose boasting rights? Maybe. Two months later, the whole deal will be forgotten for the next fad. But people just hate to miss out.
Fast forward to Bernie Madoff. I’m sure phrases such as “all the wealthy investors are with Bernie” or “Madoff, investor to the wealthy, is managing my portfolio and giving me a huge return per year”. These phrases suggest so much about those who are with Madoff. Clearly they are very wealthy because it is an exclusive club. Clearly they are in-the- know because their returns are greater than most investors. And, they were so worried about being with the other powerful people, they didn’t question the returns.
Obviously hindsight is easy. And a lot of intelligent people were duped. There might have been some Athenas in here.
Carrie Rattle is a Principal at BehavioralCents.com, a website for women focused on mind and money behaviors. She has worked in the financial services industry for 20+ years and hopes to inspire women to better prepare themselves for financial independence.