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Madoff’s Impact on Jewish Financial Advisors

Whether you are an advisor, insurance agent, stock broker, financial planner, or a Registered Investment Advisor (sorry if I missed a few titles), the impact of Madoff’s sociopathic greed has had a rippling effect throughout our industry.

For those of us who pride themselves on doing the right thing for our clients and putting their needs before our fees or commissions, I would like to say out loud, “Madoff is a Financial Kapo”! From the time his story hit the New York Times, I have had clients and prospects scrutinize any recommendations or suggestions with more pessimism than ever before.

While I am all for full disclosure and better educated consumers, there is a certain amount of dignity I believe I have earned after almost 25 years of helping families and the businesses they own. Financial Planning has been my family business for over 50 years, and we have remained conservative in our plan designs, recommendations, and advice. While we have watched about half a dozen of our contemporaries in South Florida have quicker success with more “Bling”, this same arrogance and disregard for the wellbeing for clients has eventually brought them handcuffs and prison time.

I am not alone! Many of the advisors I have worked with on an institutional capacity are in the same boat as I am. They have spent their entire lives doing the right thing, going above and beyond the call of duty to help their clients. One dirtbag like Madoff (the sheer magnitude of his Ponzi scheme is mindboggling) causes a backlash that really hurts the integrity what we do. “What is this Open Architecture platform you speak of? Didn’t Madoff do the same thing”? An annuity/Hedge Fund, didn’t Madoff offer the same thing his clients? These are questions we are fielding on a regular basis, and try to explain to the best of our ability. For Jews (like me) who built their business model on integrity first-client centric business consulting, what do we do and how do we handle this?

I have been very fortunate to have coached, mentored, and worked with thousands of advisors throughout the country in an institutional capacity, and most are feeling these same effects even if they are not Jewish. What used to be a rare discussion on SIPC protection and Lloyds re-insurance has become a staple of the first meeting introduction/Approach Talk. So maybe part of the answer is more detailed explanations of what we are doing for the families we work with. Possibly more patience, further transparency, and full disclosure will mitigate our client’s fears?

Personally, I do not understand how a Jew could destroy generations of Jewish wealth and defraud Jewish charities. We are a minority, we are targets, but most importantly, we need to support each other! In my opinion, Madoff is the equivalent of the “Kapo” during the Holocaust. He is the “Financial Kapo”. Unfortunately, he is not alone and monthly the news is filled with more cases of Jewish greed, damage to others, and financial improprieties. While Madoff may have been the worst, there are others who are damaging our reputation, and putting Judaism in a bad light.

To add oil to this fire, I read recently in The Miami Herald that several other Jewish “advisors” had been indicted in the creation of an $800 million Ponzi scheme that bilked hundreds of investors out of their life savings. Last week, in the Boulder Daily Camera, another group of dirt-bags from Longmont, created a Ponzi scheme to the tune of $18 million.

It is my opinion, that it is time to get back to the basics of who we are…..beginning with “Tikkun Olam”. The core of a Jew is Tikkun Olam! Throughout history, Jews have worked their way to the top of the social, political, and scientific world through a diligent work ethic and bound by the “original” ethical standard of “Tikkun Olam”. It is our duty and our responsibility to “Shed /share the Light” to our brothers and sisters throughout the world. However, part of our responsibility is not verbal, but to actually “Live it”, and have our lives be an example of righteous behavior. For example, I will be “gifting” a certain percentage of my income to a charity I am very fond of and believe in, as well as what they stand for. I am also working with my compliance department to be able to offer some “pro-bono” planning. Everyone one of us is different, but this is how I am rebuilding and giving back. I refuse to let one coward ruin my business and the reputation of my Jewish brothers in the financial services industry. We need to fight back with honesty, empathy, and be a light for others to follow.

Shalom,

Daniel

About Daniel Rosenberg

Daniel Rosenberg is a 2nd generation financial advisor who graduated from the University of Georgia in 1986, and earned his MBA from the University of Miami in 1991, while working at his family's financial planning firm from 1986 through 1999. What differentiates Mr. Rosenberg from any other advisor you will have the opportunity to work with is his diverse background in the retail, wholesale, and institutional divisions of the financial services industry. In addition to providing traditional retail financial planning to thousands of individuals as well as the businesses they own (including law firms, hospitals, banks, chambers of commerce, and corporations of all sizes), he has acted as a consultant to and/or worked with over 5,000 financial advisors, brokers, planners, trust officers, and insurance agents throughout the country. He was very fortunate to have traveled with and learned from many of the Senior Portfolio Managers and their team of analysts, from some of the largest investment firms and insurance companies in the world. As a true "Industry Insider", Mr. Rosenberg has been involved with the entire "Life Cycle" (i.e., product creation, syndication, marketing, and finally the distribution of these products to financial advisors who would then sell them to their clients) of mutual funds, insurance products, private money management, REIT's, and Hedge Funds. This unique and broad experience in retail financial planning, wholesale territory development, and institutional investment management has provided Mr. Rosenberg with an unequaled depth and understanding of Investment Management and the "Life Planning" processes. Advisor Solutions is aptly named because Mr.Rosenberg has taken the"Best Practices" from the most successfull advisors in the country, as well as the "Institutional" investment management strategies (i.e., Ivy League Endowment Model) practiced by large corporations and endowments. He brings this wealth of wisdom to a private client practice in Colorado and Florida.

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2 comments

  1. Thank you Dan… And how do we recover from Blankfein and Goldman Sachs, whose greed is at least in most respects legal?

    • David:

      You have a very valid point, but it is different from my perspective because of the impersonal nature of institutions. When you sit across from an individual and help their family accomplish/create a financial plan, you are dealing with an individual who has feelings, emotions, and experience in life. When you manage money for an institution or spend the money of an institution, there are still ethical considerations, but not on a personal level. . I have worked for several of the largest investments firms and insurance companies in the world. An example are the budgets I was provided for entertainment and marketing support. The latitude with which to spend that budget, and the responsibility of those assets (which are shareholder dollars at some level) are nebulous at best. At an instructional level, you are pretty far removed from the shareholder whose money you are using to entertain money managers, analysts, and other institutions. This is how you earn new business.

      As far as what Goldman Sachs was doing, you have to understand that derivatives are complex financial instruments and have no "intrinsic value". They are like money………good or evil depending on how they are used. For example, did you take your bonus and support the neo-Nazi’s…………or did you make a charitable contribution to JAFCO? Goldman Sachs literally placed large bets on the decline of the US Mortgage markets (which is repulsive in some respects). However, what if they used this knowledge/derivative in a way that actually protected portfolios and created wealth for a large number of people? There is also the "front running" for their private client's accounts, issues of impropriety, and non-public information which was utilized.

      Madoff took direct accounts of individuals, families, and charities. He and his firm sat across the table and lied to human beings. This behavior deserves public flogging followed by an execution. On the other hand, the Goldman Sachs analogy is reminiscent of what Michael Milken did in the 1980’s. He saw an opportunity for arbitrage and profited at the expense of others. I believe the hearings will show that Goldman Sachs did not act morally, ethically, and they profited at the expense of the American public. Ironically, like Drexel, Burnham, Lambert in the 80’s as well as steroids in baseball during the 90's, there were not strict enough guidelines for them to follow.