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Avoiding The Next ‘Hustle’

Rohanna Wise

“There are no good guys in this story,” laments hedge fund manager Dan David. “Including me.” David appears in the trailer for the documentary “The China Hustle.”  The film details a little-known Wall Street scam where investors bought shares of fraudulent Chinese businesses.

The filmmakers are the same producers who brought us a similar documentary on Enron in 2005.

The trailer is compelling. Unidentified talking heads decry the audacity of the fraud. Surveillance footage seems to reveal an elaborate charade worthy of a Bond villain. And all the while a sinister bed of creepy music leaves no doubt: This was a downright evil plot, and investors suffered.

Greed Still Good?

While “greed is good” became the unofficial (and rather odious) creed of 1980s Wall Street, a notable corollary is that greed is sexy. No investor wants to be on the other end of a call explaining that their sure-fire investment was nothing but a mirage. But most reports of Wall Street wickedness do indeed make good stories.

So as long as there are swindlers, the lords of popular culture will continue to keep us informed on the likes of Milken, Madoff, Belfort or whoever the next financial Lex Luthor may be.

There is, however, great irony in holding up white-collar criminals as exemplary of the world of investment management.

Contrary to certain popular conceptions, the true picture of a typical financial advisor is one far more dedicated to mitigating risk than maximizing returns.

Like any professional advisor, FAs are only good as their reputation for giving solid advice. And the one thing that can irreparably do damage to their reputation is an unseen risk blowing up a client’s portfolio. The FA may often feel like an NFL referee – they are only noticed for bad calls. They are expected to make the good calls.

Risk At The Top Of The List

“People think we’re in the money management business but we’re really in the risk management business,” Jay Welsford, senior vice-president at Connor Clark & Lunn Private Capital told CNBC recently.

Welsford likes to talk about a meticulous checklist of risk factors that his firm employs, communicating each detail to every client.

And while currency risk is undoubtedly something that should be on such a checklist for every FA, it is often not given full attention. Indeed, the horrors of “The China Hustle” may be exemplary of the complicated business of managing money in a foreign currency. FAs who overlook currency risk could hear from clients feeling “hustled” themselves.

WiseRisk’s Role

WiseRisk can help you take that nagging uncertainty out of your clients’ portfolios. Through our hedging strategies and set rules of rebalancing, currency risk is mitigated — even in times of great volatility. Experts at Wise Trading Tech are here to help and answer your questions and implement your strategies.