Should You Kidnap Your Financial Adviser?

An incredible story emerged in Germany last month of a group of five pensioners aged 61 to 80 who kidnapped and later beat a financial adviser who had sold them real estate investments that subsequently collapsed in the sub-prime crisis of 2008.

The banking crisis and financial meltdown of 2008 gave rise to a lot of anger against the banking and financial industry. One high profile victim of the backlash was the former head of RBS, Sir Fred Goodwin who had his home and Mercedes car vandalized for allegedly enriching himself whilst ordinary people lost their jobs. Top executives of the distressed insurer AIG received death threats amid fury over bonuses they received. But no-one was actually attacked. So what led this group of elderly folk to resort to such desperate action?

From various newspaper reports it appears that the events began in the late 1990's when one of the couples started to invest in the then booming Florida property market via an investment firm run by James Amburn, an American financial adviser who was living in Germany. In the early years the returns were good so they invested more together with the other three pensioners. But their investments crashed in the sub-prime mortgage crisis and by early 2009 they had lost as much as 2.5 million Euros.

Determined to recover their losses they embarked on an elaborate plan to abduct Mr. Amburn and force him to repay the money they lost. The plan involved tying him up and taking him in the boot of a car to the lakeside home of one of the pensioners near the Austrian border. Attempts to es-cape were punished with beatings and he was eventually saved only by his offering to send a fax to his bank instructing the transfer of some of the money they sought. In so doing he managed to send a coded message which resulted in his rescue and the arrest of the five pensioners by 40 heavily armed police from Bavaria's terrorist unit.


There can be very few people who did not see a large chunk of their assets wiped out during the financial meltdown of 2008. Whether you owned stocks, a pension plan, commodities or property, the chances are you were much poorer going into 2009 than you were a year previously. You may have been among the thousands of investors in Asia who bought 'guaranteed' structured products from respectable banks. If they were guaranteed by Lehman Brothers unfortunately the guarantees proved worthless. Who was to blame? The banks? Their wealth managers or financial advisers? Or just the system that gave us all a false sense of security? Well, you could kidnap your financial adviser, but you cannot kidnap the system.

Maybe, on the other hand, you can pinpoint the reason for your plight to one individual. This could be the case for example if you were persuaded to put the bulk of your savings into a 'fantastic, high-return absolutely risk-free' investment. Or you were sucked into a long term contractual savings plan with the promise that you could take all your money out after two years. Those who have tried to do so have found to their dismay that they can retrieve only a fraction of their money. There is nothing wrong with a long term contractual plan, but it should be understood that it involves a commitment for the agreed term and that failure to maintain the commitment can prove very expensive. You would have an even more legitimate right to take action if you were victim of a Ponzi scheme such as that created by the now infamous Bernard Madoff. In his case, kidnapping was not necessary; he is now a guest for life of the US prison service.


Kidnapping your adviser might provide a measure of consolation, but it is far better to avoid getting into a desperate situation in the first place. Taking the time to learn about the financial markets and the principles of financial planning will go a long way to avoid getting into the same boat our pensioners found themselves in.

One of the first principles is to understand the relationship between risk and return. The higher the expected return, the higher the risk. Our friends were apparently promised an annual return of 12%. There is nothing wrong in being told an investment has a target of 12% or even 15% or more, but a target must not be confused with a guarantee. Unfortunately, people's expectations of returns are rarely matched in reality. And when high returns are promised there is increased risk of capital loss.

If you are terrified of losses then you should go no further than putting your savings into a bank account. You will not get rich that way but at least you should never have to contemplate kidnapping anyone. Unless of course your bank goes under and the manager disappears! Many banks did indeed go under during the financial meltdown and many people lost some or all of their savings in accounts around the world. Which demonstrates that there is no 100% safe place for your money.


About the safest investment you can find is a US Dollar Treasury Bond. Because it is backed by the US government you can be certain that you will receive regular, albeit modest interest and you will get your money back in full at the end of the term. The US should never have to default because it can always print more money to meet its obligations! But is it risk free? Not necessarily; if you sell your bond before it matures the proceeds may be less than the face value. Also, the 3% or so current rate of interest will become a poor return if inflation runs rampant. And if the US Dollar is not your base currency you have the risk of currency devaluation.

What about the guarantees offered by structured products? They are only as good as the strength of the bank providing the guarantee. Generally this works, but it didn't in the case of Lehman Brothers. And bear in mind that guarantees come at a cost, such cost usually being at the expense of performance.


As should be clear by now, there is no absolutely safe investment. But throwing the towel in and avoiding risk altogether is not an option. That's as bad as staying in bed to prevent getting run over. To avoid getting into big trouble and then having to look for a scapegoat to kidnap, it is far wiser to invest in a wide range of assets, keeping at all times ample cash reserves ideally in several different banks and jurisdictions. The assets may be in more than one currency and can include stocks (via mutual funds for most investors), bonds, commodities and property. Stick mainly with large familiar institutions preferably based in highly regulated jurisdictions that offer a degree of investor protection. Avoid unconventional investments unless you understand the risks and already have an ample range of conventional ones. If three words could sum up the safest investment strategy they would be,


Unfortunately for our elderly friends it did not. They still lost all their money and now they have lost their freedom as they were sentenced to up to six years in jail. So try not to follow in their footsteps; don't risk your future wealth by putting too many eggs in any one basket, particularly if the returns appear very enticing. And don't kidnap your financial adviser, unless you plan to live in a retirement home where the windows have bars.