Australian Broadcasting Corporation

TV PROGRAM TRANSCRIPT

Broadcast: 18/02/2004

Wealth seminar spruikers 'back selling schemes'

Reporter: Tim Lester

KERRY O'BRIEN: Also later, we'll have more reflections on a golden girl and opera's Welsh wizard.

Welcome to the program.

First tonight, the property market might be coming off the boil but there's still plenty to be made in the get-rich-quick business.

Property buying seminars came into sharp focus last year with the collapse of the Henry Kaye Group, resulting in a meeting of creditors today that voted to put Mr Kaye's property education company into receivership.

Now the Australian Securities and Investments Commission says the spruikers of wealth seminars are getting back into selling stock market schemes and the complaints are rolling in.

But while the regulator says it's watching these schemes closely at least one is trading under the auspices of an ASIC licence.

Trading Pursuits' Response:

Trading Pursuits does have an Australian Financial Services Licence, and we are governed by ASIC with high compliance standards. To have been granted this licence we had to meet strict criteria, and if we don’t comply to the industry rules it can be revoked. Trading Pursuits are careful to abide by all rules.

So what protection is there for the punters?

Business and economics editor Tim Lester reports.

TIM LESTER: It's been a theme through human history.

Our ancestors dreamed of finding the secret to great riches, maybe a gold map.

So do we.

Though now, the nuggets are in shares and property.

ROGER MONTGOMERY, INVESTMENT TRAINER: They want the red button that says sell.

TIM LESTER: The maps are schemes to outwit the market.

ROGER MONTGOMERY: They want the green button that says buy.

TIM LESTER: And they're for sale to anyone who believes.

ROGER MONTGOMERY: Just, tell me when it lights up and I to want press it and I will make the money.

PETER KELL, ASIC CONSUMER PROTECTION: The level of complaints that are coming through to us about share trading seminars and software is beginning to pick up again.

TIM LESTER: Peter Kell heads consumer protection at the authority governing those who give us financial advice, the Securities and Investments Commission, or ASIC.

PETER KELL: What we are also seeing is more people promising more exotic sorts of schemes, derivatives and other options.

Trading Pursuits' Response:

This report was made back in early 2004, when derivatives such as CFDs and Options were relatively new to Australian retail investors. It is not a scheme, but a legitimate trading instrument. What we have seen since then is a growth in the popularity of trading derivatives by retail investors, whether trained by Daniel or not. In our opinion, the risk comes from NOT educating yourself before you trade derivatives, and thus not understanding the leverage and how to manage the risks.

TIM LESTER: Gold Coast-based trainer Daniel Kertcher sells a weekend of training, this 8-set DVD and trading software and for just under $4,000 per student.

DANIEL KERTCHER (TRAINING DVD): You're going to learn how to develop a guaranteed passive income for life.

TIM LESTER: On it the images and rhetoric of the 30-year-old self-claimed multimillionaire ooze wealth.

DANIEL KERTCHER: I am in the process of turning $2,000 into $1 million.

TIM LESTER: At this Sydney seminar last year, he told student investors he was making $1 million for charity.

DANIEL KERTCHER: It's very easy to turn $ 2,000 into $1 million.

All you have to do is keep doubling up - 9 trades, you're done!

Trading Pursuits' Response:

This was taken out of context. All Daniel was attempting to do was to illustrate the mathematical concept of compounding returns, which even Einstein said was the eighth wonder of the world. The context of the quote was Daniel asking a room of people how many trades they thought it would take, if you doubled your money on each trade, to turn $2,000 in $1,000,000. When people don’t have the time to sit down and work it out, they typically guess that it would take 20 or 30 trades at least to achieve that kind of outcome. But the real answer is only 9 trades, because of the immense power of compounding.

This surprises a lot of people. The purpose of the mental exercise was to cause a shift in people’s perception of what’s possible. The quote was not trying to say that doubling your money on every trade is easy. Not at all. Just that if you did double your money on every trade, your capital would grow faster than you might think due to the power of compounding.

TIM LESTER: And of course they could make their million.

DANIEL KERTCHER: Who cares?

You could have it done in the next year.

My friend, who taught me this, has done it over three times in the last three years.

He does it for sport.

He doesn't need the money.

He's a multimillionaire.

Trading Pursuits' Response:

This is yet another quote taken out of context

Trading Pursuits' Response:

Our business model is based on a free introductory seminar (which is actually only 2 hours), at the end of which attendees have the choice to purchase our full course and training, or not. Most of the 2 hour is focussed on real education.

We recognise that our product and strategy needs some explaining, and we use the time at the introductory seminar to do just that by providing some solid education in that time. It is not a long sales pitch. Of course we are selling a product, but the pitch for the product is based on a delivery of a good sample of the type of education the client would get in our courses, and not hype. This model reduces risk for the client – they get to understand the concepts, can assess whether this type of training would be right for them, and have the opportunity to ask questions face-to-face ... for no more investment than their time!

TIM LESTER: Daniel Kertcher took his seminars across the Tasman to windy Wellington two years ago.

PHIL MITCHELL: A 100 per cent money back guarantee.

TIM LESTER: With an advertisement that caught the eye of NZ consumer journalist Phil Mitchell.

PHIL MITCHELL: They're saying I can make 331 per cent return in three months.

GEK MUI LEE, WEALTH SEMINAR STUDENT: Financial independence, you know, you could give up your job.

You could just live on trading full time eventually.

TIM LESTER: So Wellington resident Gek Mui Lee enrolled in a Daniel Kertcher seminar.

GEK MUI LEE: He once said if you are quadriplegic and all you could do is blink, you could do options trading.

I beg to differ.

TIM LESTER: Phil Mitchell did the same course.

He and Gek Mui Lee both then followed up with fellow students almost a year later.

GEK MUI LEE: Maybe two of them were just breaking even.

The rest of the people lost money or were too afraid to try.

PHIL MITCHELL, NZ CONSUMER JOURNALIST: Overwhelmingly, people had lost money and a great deal of money and very quickly.

TIM LESTER: How much money?

PHIL MITCHELL: An average loss of $10,000.

TIM LESTER: Though he calculates that one person did really well - Daniel Kertcher, selling students his seminar package for a hefty NZ dollar price.

PHIL MITCHELL: 65 times $4,250 is not a bad return for three days work.

That is nearly $300,000.

TIM LESTER: Phil Mitchell's article in NZ's consumer magazine stirred Daniel Kertcher to threaten legal action.

He insists one third of students in the Wellington course in question made money.

And another 12 didn't even bother to trade.

That still leaves plenty of losers.

Trading Pursuits' Response:

What Daniel and Trading Pursuits can offer is education. Like a TAFE certificate or University degree, not everyone who completes the course will make a career of it, or be successful. That’s just an unrealistic expectation. Phil Mitchell was counting the cost of the education as a loss! Is that reasonable? No. While we can do our best to educate clients about the potential risks and rewards from trading, we cannot and do not guarantee success. What we do instead is show our clients exactly what we are trading with our own funds, and publish these trades before we even enter them... and then track our results in an online report. We put our money where our mouth is in a transparent and trackable way, so everyone can see it. Do our clients go on to trade themselves?

A recent survey of our clients showed that about 80% of them go on to trade regularly. And while we can’t track the financial success of all of our clients in their trading (our Australian Financial Services License does not extend to personal financial advice, so we are not actually authorised to collect personal financial information)… we can and do track our own success in trading the strategies we teach.

So we are as transparent as possible with how the strategies we teach work in practice, and the kinds of returns we are able to generate from them.

But Daniel Kertcher isn't apologising.

Rather, he has organised seminars for five Australian capital cities in the next few months.

If you can't get to see him, no problem.

There are plenty of others selling their own gold maps and they're not hard to spot.

PETER KELL: Often glossy brochures.

ROGER MONTGOMERY: Look out first for any claim that there is a secret.

ROGER MONTGOMERY: PETER KELL: Some sort of magical track record of past performance.

ROGER MONTGOMERY: The more testimonials there are, the more you should be concerned.

Trading Pursuits' Response:

This comment doesn’t make much sense to us at all. We have many clients who have completed our courses and verify how useful they have been.

TIM LESTER: Roger Montgomery is a Balmain-based fund manager and investment trainer for the Australian Stock Exchange who has given up warning people about the merchants of wealth.

Trading Pursuits' Response:

Fund managers make commissions from amounts you invest with them, and they cannot guarantee returns either. Of course they would rather you didn’t learn to trade for yourself – because they would miss out on their fees if you did.

ROGER MONTGOMERY: I spent the early part of my career trying to educate people about these things.

I'm, in fact, just tired of doing it now.

Trading Pursuits' Response:

Roger may have decided he was better off charging people fees for managing their money and keeping them ignorant instead.

TIM LESTER: Roger Montgomery is unimpressed even though Daniel Kertcher has diluted his astonishing NZ profit claims.

His Australian ads say he can earn us 6 per cent per month, not per year, per month.

That is still about 15 times the interest offered by banks.

ROGER MONTGOMERY: If it was that easy to make 6 per cent a month, we would be doing today.

It isn't that easy, so we know not to believe those claims and no one else should.

Trading Pursuits' Response:

Well Roger, we were doing it. And the broking account transcripts we provided to 7:30 Report proved it.

TIM LESTER: Late today Daniel Kertcher strongly defended his 6 per cent earnings claim saying he could provide actual trade examples to prove it and attaching four pages worth in case we had doubts.

PETER KELL: I have never seen anyone sustain a 6 per cent a month return over a long period of time.

In many ways, it is a meaningless and potentially misleading claim.

So if that has been made, it is something that we will be looking at.

Trading Pursuits' Response:

It was not misleading, it was true, and Daniel proved it with the broking accounts he faxed through when he learnt this story was going to air. If it was untrue, we would not be operating under an Australian Financial Services Licence still, today, 7 years later. It’s more likely that these commentators are not traders themselves, and unfamiliar with advanced income and risk protection strategies.

TIM LESTER: It certainly has been made but the problem for ASIC is that it has been made with ASIC's imprimatur, as Daniel Kertcher told the 7:30 Report in a recent letter, the securities firm he operates under has an ASIC financial services license.

ROGER MONTGOMERY: It surprises me that someone who has a license can make a claim like that.

TIM LESTER: And it frustrates the Australian Stock Exchange.

Doesn't that tell us that the licensing system is flawed?

PAUL DOLAN: Well, there's a question that you would like to pose to ASIC, I think.

TIM LESTER: We did.

What is the point of having an ASIC licensing system if one of the licensed operators is making claims that you concede is absurd?

PETER KELL: Dealing with someone who has a license is an important first step but it won't guarantee that you will get reliable advice.

Unfortunately, we do run into people who have licenses, who have people working for them, representatives, who may step over the line.

Trading Pursuits' Response:

Trading Pursuits takes the ASIC regulated licensing framework very seriously, and has never been known to “step over the line”. We take great care to present ourselves in a manner that is honest, with integrity, and to be compliant with the regulatory requirements.

TIM LESTER: It's a sensitive subject for ASIC.

Just last year the commission took Henry Kaye to court after the property millionaire claimed ASIC approval for his training courses.

But Daniel Kertcher has still more credentials.

As an options adviser, he is accredited through the Australian Stock Exchange.

PAUL DOLAN: We're not involved in the licensing of brokers as such or financial advisers as such.

TIM LESTER: Just training them.

And in the Daniel Kertcher case, the stock exchange concedes we shouldn't read too much into its options accreditation.

It only takes a month or two to qualify and the ASIC license, well - PAUL DOLAN: For example, having a license does not make you a great driver.

Trading Pursuits' Response:

Perhaps, but it does ensure you have met the requirements of the licensing regime, which are designed to protect the safety and security of all. The ASIC approval procedure to gain an Australian Financial Services License (AFSL) is an extensive process. A great deal of documentation is required about company procedures and policies, and the skills and experience of the Responsible Managers, in order to comply with the requirements of the licensing regime. Maintenance of the license also requires ongoing reporting, maintenance of compliance registers, and regular checks.

An AFSL is not granted easily or lightly, and a lot is required of the licensed company to maintain that license. Just like the driving license system, which tries to ensure that dangerous drivers are kept off the roads, the AFSL regime is designed to ensure that participants in the Financial Services market are operating with integrity and honesty.

We know that we operate our business in a compliant manner, and so we welcome and support the AFSL regulatory regime as it helps to keep our industry clean and fair.

TIM LESTER: We approached Daniel Kertcher for an on camera interview.

He declined.

GEK MUI LEE: After doing this for one and a half years, I realise that it's not as easy, you know, as some of his claims were.

Trading Pursuits' Response:

We did not claim trading was easy. However, we do teach things in a way to make them as simple as possible to understand.

Note that this person does not say she has lost money trading, just that it was not as easy as she had expected. The same could be said of driving, or any other skill which requires practice. Sometimes our expectations of how quickly we will master something, or the success we will be able to achieve while we are still learning, are unrealistic. That does not mean the education failed, just that the application of it can take time to master. At Trading Pursuits we place a very strong emphasis on graduate support and service, for this very reason.

TIM LESTER: We also approached the Melbourne-based promoter of several other makers of modern day gold maps, the management of Break Free Events would not comment and told us none of the gurus it promotes were available for interview either.

The leaders of this latest gold rush are unwilling to say much outside their seminars, though they are they are quick to point to any credentials they carry, the ones intended to guide us to good advice.