“A couple of years ago I was contacted by a financial advisor who had recommended that his clients invest in Morrison Laurier. One of those clients had read about a recent real estate investment scandal, which will remain unnamed, and had called the advisor to inquire as to how he, the client, could know that Morrison Laurier was not a similar scam. The advisor passed the question on to me for comment.
Every time I see one of these Bernie Madoff/Earl Jones/ Alan Stanford-type Ponzi scheme stories, and there has indeed been many, it turns my stomach. Apart from the damage it does to investors in the individual cases, it makes it that much more difficult for anyone whose business involves managing or investing other people’s money, mainly because it strikes at the heart of people’s ability to trust.
There are several things that distinguish the scandal that prompted the call from that of Morrison Laurier and Morrison Financial. But I should point out at the outset that it is so far unclear whether the subject story is one about dishonesty, or simply bad investing that may or may not have led to dishonesty. I do not know more about the situation than what has thus far appeared in the press. It seems that they were doing equity investments in real estate, and not secured mortgage lending. Did the problems emerge because they made bad investments, or because the market turned on them? Or was the whole thing bogus? We do not yet know.
But here’s the thing: People can become paralyzed and choose to stash their money in a pillow and earn nothing. Or they can choose to invest it and manage it themselves and thereby try for a greater return. Most people, however, for a variety of reasons cannot do the latter, or do not want to do so. So they are constantly searching for places where they can invest their money passively with someone else in the hope that, through superior, or at least dedicated, management, they will achieve a higher yield. There is nothingwrong with this. But when a person chooses to entrust their money with someone else, they are taking a pure gamble if they do not first conduct due diligence with respect to the person, and the organization’s, competence and integrity. This applies even when they choose to place money with an advisor, and before the secondary investment of that money in companies such as Morrison Laurier. If the advisor is a rogue, the money could be redirected to the Cayman Islands or some similar locale before ever reaching Morrison Laurier. And it might be years before the client finds out.
So what’s a person to do? Here is all one can do. Get close to the situation! Get in there. Meet the people with whom you are considering investing. Check up regularly. Test the information that you receive by trying to confirm it through other sources. Whether you are an advisor representing client’s money, or the client himself or herself, continue to do this and you will be doing your clients or yourself a good service-in the case of an advisor, worthy of what you are getting paid. Ignore it, and you are letting the clients or yourself down.
When it comes to knowing what an organization is really about, the thing that I look for and trust most is openness and access to multiple points of contact. If all information and communications are funneled through one person, the potential for fraud or dishonesty is greatly enhanced. Double the number of people that have to be in on it, and the potential for fraud or dishonesty is immediately cut to less than half. Triple the number and it almost disappears altogether. One person can be dishonest and fraudulent, as can two. Once you get to three or more, it almost always breaks down. Someone’s conscience is twigged, or somehow the secret gets out.
At Morrison Laurier and Morrison Financial, weexercise openness to the extreme. Investors looking for information, or simply wanting to remain comfortable with where their money is placed, are welcome to come to see us at any time. They can meet and speak with, not only me, David Morrison, but any one or more of Adam Rose, Graham Banks, Alenna Emer, Caroline Caldwell, Alex Tveit, Derek Chin, Adrian Bennett, Shelly Goldenberg or Tatiana Ignakova. They can ride with Alex, Derek or Adrian as they go out to inspect individual mortgage investments, or they can go meet the borrowers and see the projects themselves. Many people invested with us have already done this. One of the advisory firms that directs money to us actually engages a professional to conduct an audit of our portfolio quarterly. That may or may not be overkill, but we have been pleased to cooperate, and we will continue to do so.
Do things like I have said and eventually you will get a feel for the tenor of the organization. In the case of Morrison Laurier/Morrison Financial, while we cannot guarantee perfection in every decision that we have made or will make, what one sees is that everyone in the organization is dedicated to the prudent deployment of our investors’ money alongside our own (including no less than $10,000,000 of my own personal funds), with preservation of the capital being the highest-ranking criterion in investment decisions. We have been at it for twenty-five years, and have created an impressive record during that time. Parting our clients from their money is no part of our agenda.
None of this, however, means that you should ever stop asking the type of question that led to me responding with this message. For the moment that you do that, you are no longer investing.
You are gambling.”
David Morrison, President Morrison Financial Corporation