Bernie Madoff made it back into the news earlier this week when it was reported that he passed away in prison at the age of 82, he was only 10 years into his 150-year prison term at the time of his passing.
For those of you who may not recognize the name, Bernie Madoff is responsible for the largest Ponzi Scheme in U.S. history. He defrauded his investors, his clients, out of billions of dollars over a number of years. A lot of those clients ended up being middle-class families who had given him their entire retirement nest egg to manage. What he had done was essentially take any new money that was being placed with him and use that to pay out to some of his older customers that were looking to withdraw their funds, so there was never really any true statements, there was never really any true performance reporting it was just all things that he made up as part of this scheme.
Now, what this fraud did was it changed the financial services industry it brought some light into some other things that may or may not have been going on and really brought some scrutiny around the practice, in a good way. One of the things that we can take away and learn from this is that if you’re ever seeking out investment management and you’re using somebody to help you with that always make sure your funds are held with a custodian. What that means, is your funds are held in custody in your name with this custodian. You’re never going to write a check or transfer funds to Lance or Tessa or Next Step or ‘Bernie Madoff’, your funds are always going to a custodian to be held in an account in your name.
This means they’ll never be commingled with somebody else. It also means that your funds can never be used for some other purpose other than for you, it can’t be used to pay out a distribution request from Joe Schmoe. It’s always going to be held in your name for your disposal, never be handled or commingled with anything else. If you want to talk about who some of the custodians are that are out there or see what it looks like to have things custody in your name, as always, you can reach out to us here at Next Step we’d love to talk about what that looks like for you.