"There are countless horrible things happening all over the country, and horrible people prospering, but we must never allow them to disturb our equanimity or deflect us from our sacred duty to sabotage and annoy them whenever possible." - Auberon ("Bron") Waugh

Investment is kind of unique, in that the quality of advice and education is frequently inversely proportional to the price. While in many fields the most expensive is not necessarily the best, in this field it is frequently an indication that it is the very worst. In newspapers and trading magazines, on investment web sites and spammed all over aus.invest on a regular basis you hear all about various gurus who have achieved fame and fortune and are willing to share with you their special techniques, for a large price.

It is not uncommon for guru courses to cost many thousands of dollars, frequently the material is packaged as a set of tapes and booklets, with other glossy material like posters and cards. Although the packaging may be bulky, all you are getting is a very thin book and a few lessons. Often courses are held at special retreats, known as "boot camps" or "trading incubators" or some other outlandish title. If the material in those courses was written in a standard book, it would be about 50 pages long and retail for $7.95 in a standard book shop, however since the package is bulked up with cassettes and videos and a variety of irrelevant information, the whole package looks far more impressive and will cost anything from $1,000 up. Robert Kiyosaki charges tens of thousands for his weekend seminars in Hawaii, and he only gives a bunch of generic real estate information and a whole lot of "motivation".

Another group I've just added to my list call themselves the National Investment Institute, they provide educational courses that teach "advanced" real estate investment techniques with a focus on nothing down real estate purchases. Their web site had a great deal of material on it that reminded me of things I wrote in my article on investment quacks, including testimonials of how simple common folk were becoming millionaires in only a short period of time. They have a variety of courses, the "teaser" costs about as much as a new small car and then there are more expensive courses that are sold for about the cost of a new BMW. I had already pretty much concluded what they were like but an announcement made by ASIC on 4 March 2003 confirmed my views: they are unlicensed and ASIC believe many of the claims they have made "breached a number of sections in the ASIC Act, the Corporations Act and/or the Trade Practices Act".

Click here to read ASIC's announcement

A number of people who have read this FAQ have emailed me about NII asking if they are the real deal, and I replied by saying the material on the website reeked of scamming but I had no proof. I suggested that prior to spending $16,000 on a course that they would probably be better off starting with something cheaper. I suggested that they could take courses in property appraisal and property contract law at the local TAFE very cheaply (I know, because I'm doing one), and that this would be a good primer. There are also a variety of good books to read (see the recommended reading list of this FAQ). You'd need to buy a lot of books and do a lot of diplomas to run up a $16,000 bill and you could do an MBA at Harvard Business School for a lot less than what NII charge for their more advanced material.

The National Investment Institute and Henry Kaye featured prominently in a documentary called "Tall Stories", aired on ABC's Four Corners program on 21 April 2003. A number of things were said about Henry Kaye, including this gem of a quote by Terry Ryder, author of various real estate books including Confessions of a Real Estate Agent:

"He is justifiably the most notorious of the get rich quick set. I think he has refined the art of inducing people to pay large sums of money for bad advice to a level that no one else has quite managed in Australia."

Henry Kaye charges $15,000 for a four day course, another $20,000 for an "advanced" course and $55,000 for entry into his "Platinum Club". Various insiders from the Kaye organisation were interviewed and under condition of anonymity they admitted that within the organisation it was an open secret that of the supposedly 75,000 people who have bought courses from Kaye, less than 1% ever went on to make any real money out of it. Reasons given by Kaye staffers, and by Neil Jenman who was also prominently featured in this story include:

• that very few people can raise the finance required to be a big time developer as Kaye recommends;

• that very few people are in any position to service such large debts;

• that very few people have the kind of skills required to make it as a hot shot property developer (and the courses don't provide such skills); and

• most people simply aren't ruthless, tough and unethical enough to implement many of the strategies which are often at best thinly disguised acts of fraud where the Kaye "investor" is basically taught how to take advantage of unsophisticated people and rip them off in real estate deals. In short, you have to be as big a bastard as Henry Kaye to make his techniques work, and very few people have that kind of ethical flexibility or the ruthlessness to steal a person's life savings in a pseudo-legal fashion.

One example of a common Kaye "strategy" involves an act of fraud against lenders. Essentially, Kaye's organisation quotes two prices on the property. One price is very high, and this is what the bank is told, and the other price is the actual purchase price, which the investor buys at.

Banks with a policy of only lending 80% of the purchase price are told that the property is worth $100,000, so they'll lend $80,000. In fact, the property was only worth $80,000 and the investor received a rebate of $20,000 on the purchase price. The bank ends up lending 100% of the purchase price, which they wouldn't normally do. Even worse, it was pointed out by one legal expert interviewed in the Four Corners story that if the fraud is uncovered, the bank may seek damages against the investor for participating in this scheme, and because Kaye is unlicensed there may in fact be no recourse for the investor to sue Kaye for advising him to commit this fraud. The "rebate strategy" is also used frequently as a way of arranging the funding for investors to buy National Investment Institute courses, essentially as a way of getting the bank to lend investors money for both the house and the course.

Update:

In early 2004, Henry Kaye's companies went into voluntary liquidation and were wound up. Thousands of customers were trying to get their money back but Kaye put his companies into liquidation rather than honour these claims. To all those people who sent me abusive emails having a go at me for criticising their hero, all I can say is that I tried to warn you! Try not to be such a sucker next time, take a TAFE course or something.

I am proud of my record on this matter, I have had plenty of abusive emails but I've also had many that thanked me, I know for a fact that this web site has cost Henry Kaye at least a few hundred thousand dollars and saved at least a dozen people from making some very serious mistakes - and that is just the ones that emailed me about it, I have no way of knowing how many people were persuaded not to spend money on a guru course but didn't email me.

Real investment courses

As a general rule, it always makes sense to look for low cost courses before taking the plunge in the expensive guru stuff. ASIC, in an article at their Fido consumer site warning about black box trading software, say it would be bizarre if a person suddenly decided one day that he wanted to become a carpenter and went out to buy tens of thousands of dollars of tools, before first making any attempt to find out if he had any aptitude for carpentry or had even made a breadboard. The TAFE units I'm doing (part of a Diploma of Finance Broking) include topics such as commercial property appraisal, residential property appraisal, property contract law and a number of similar topics. The text books are the most expensive part of the course, and they're only $50 or $60 each. If you are thinking of doing some sort of course in property I think this would be a good start.

Now a real investment course, such as the Diploma of Financial Planning (DFP) done by correspondence via Deakin University, or numerous other courses done via a number of professional organisations are in complete contrast. The DFP consists of 8 units, which seldom take less than 2 years to complete, and the study guides are eight thick lever arch files filled with a large amount of information. Exams are sat, assignments are submitted, grades given. The Diploma is recognised by a number of professional bodies, and ongoing professional commitments include future audits, ongoing study and membership of a number of development programs. The total cost of the entire course is a shade over $4,000, and this gives you a pretty good grounding in financial planning and basic investment. In order to pass this course it usually is necessary to do around 7 hours study a week per unit, and the assessment is relatively rigorous.

As well as financial planning you can take courses in financial markets, mortgages, real estate, security analysis and more. All of these courses give at least a diploma, which can be put on your resume and will probably get you a genuine investment job in a famous financial institution. You will pick up far more investor knowledge after a while on that job than you ever would learn from a self-proclaimed guru.

You might want to have a look at the Securities Institute of Australia for some very good courses on finance, investment and trading, or maybe the Australian College of Trading if you are just interested in trading. These are much more reliable educators than someone that wants to charge $5,000 to show you dodgy "secrets" that only the "super rich" know about. I particularly recommend you avoid overseas seminars on tax evasion and foreign investment, I know of a fair few of these and they are all scams.

If you really want to get seriously hardcore, you can do the Chartered Financial Analyst course. This is just about the most detailed and difficult course on investment available anywhere (though some MBAs may be "better"). The CFA course is done by correspondence (though you have to sit the exams in Sydney), and is open to anyone with a university degree (even one not accounting, economics or finance related). The CFA course covers the full range of financial analysis and portfolio management from shares to derivatives and real estate and more. The course is very reasonably priced at the equivalent in Australian currency of a few thousand dollars and once you've completed it you'll be very employable in the funds management industry and probably able to command a very impressive salary!

If you don't want to do CFA seriously and take the exam, but still want to learn the CFA material, enter "CFA" into the search field at eBay, you'll be able to pick up second hand study notes and revision books for a couple of hundred bucks or less. Even a self-taught unaccredited CFA student should be able to run rings around the graduate of any guru course.

A an alternative course to CFA is the LIFA program. This is a newer qualification and it does not at this time enjoy the recognition and prestige of CFA, but the course is more flexible and less costly than CFA and undoubtedly good value for someone wanting a comprehensive investment course. Those people who are behind LIFA claim their course is at least as good as CFA though many CFAs I know scoff at that.

Other courses, for similar prices also contain large amounts of information, and leave you qualified in other professional fields, funds management, securities analysis, derivative trading, real estate valuation. Courses in trading can often be somewhat more expensive, as they carry the glamour factor which gives a certain price premium, though the real trading training is usually done in-house when you join a futures brokerage. In addition many of these courses are postgraduate diplomas, you need to have a background in accounting or economics at university.

For the cost of one newspaper advertised, all welcome, one weekend seminar teaching Gann price-time calculators you can take several graduate diplomas. Can a $5,000 weekend seminar on creative finance possibly teach anything like the depth of a course done through a university on real estate investing that costs $2,000, and is covered by HECS? The diplomas will entitle you to a variety of positions as a professional investor, the weekend course will get you a little certificate of completion and maybe you'll come out knowing one or two things that everyone else read about in a library book ages ago. I wonder if all these people going to various super investor seminars have ever read a book on investment prior to attending? Surely someone willing to spend a third of a year's salary would want to get some info first, but alas this is not true. For many, this expensive purchase is their very first foray into investing, they know nothing at all so they tend to believe the sales assertion that investors these days use sophisticated automatic stock-picking systems to do all of their analysis for them.

Beware anything that is advertised as a free beginner seminar. Although in theory it can't hurt to attend a free seminar, unless it is with a well known organisation such as a university or the ASX, the seminar is probably going to be nothing more than a teaser for an expensive course, or a sales pitch for some kind of product such as black box software or a data service. Be very suspicious if it seems too good to be true, or if the product is really expensive. The way to wealth is well documented, in this FAQ is a large amount of stuff that should at least be a start, but there are hundreds of great books to continue on with. The methods are well known, it is just that most people are too lazy or busy to invest properly and look for easy ways out. There are many people out there that would rather pay $10,000 to some company selling a product that promises easy returns with little effort, rather than spend $100 at the book shop on a few good books.

I go to them from time to time, just today I was asked by a telemarketer with a nice cheerfully robotic voice reading off a script if I would like to attend a free real estate seminar. Might be fun, hearing all about how absolute beginners can become millionaires overnight because negative gearing allows you to claim a tax write off... and the presentation I attended from a certain software vendor was a riot also, so much inaccuracy, such a dumb speaker, and people were actually listening! I enjoyed it as a kind of real life comedy theatre, never have I seen such an inept man trying to sell something so expensive, in addition the hors d'oeuvres were terrific! Even car salesmen try at least to pronounce the buzzwords correctly, and he certainly did use a few of those! Gann (which he repeatedly pronounced Garn, to the amusement of some), Elliott Wave and other techniques which I sincerely doubt have anything to do with this software were all credited with the success of the product.

John Reed gives a good argument against guru courses here, he says pretty much what I say here, that popular seminars contain very little good material and are way too expensive, but he also has a table where he compares guru courses to such activities as doing a semester at Harvard, on full board. There are many gurus who will charge you more than that just for a chance to listen in on a phone conference!!!