Interview With A Marked Man

What started as a guest post on the Money Smarts Blog called “Why 99% of financial advisors should be shot out of a cannon” (which has since been removed by the blog owner) had ballooned into a heated discussion on multiple blogs about many things. The promoters behind the post includes someone (Martin Horvath) who has been banned for life by the Mutual Fund Dealers Association. He is now back promoting an aggressive tax strategy. Some bloggers and many commenters have tried to find out more information. They are not happy with Martin, and Martin is not happy with them. I reached out to Martin Horvath to see if he would agree to an interview. He did. I recorded the interview and am posting it here for all to hear. NOTE: It is about 60 minutes in length.

Background

I think it would be worthwhile to read the following posts on various blogs and also to read through the comments. Things got pretty heated in a short amount of time.

The Interview

This is available as Episode 10 of the WhereDoesAllMyMoneyGo.com Internet Radio Show. This is a podcast that is available on iTunes. You can click here to subscribe.

OR

You can listen to it here (separate website for the podcasts).

AND

If all else fails, you can try clicking here for direct access to the MP3 file.

Comments?

Please do leave a comment with your thoughts on the interview…

Related posts:

  1. My Thoughts on “The Interview with a Marked Man”
  2. You are going to Interview the CEO of ING Direct Canada
  3. Interview with the CEO of ING DIRECT Canada – Part I
About Preet

Preet Banerjee is a Canadian personal finance commentator. He is a television host for The Oprah Winfrey Network, a Money Expert for The W Network, a personal finance columnist for The Globe and Mail, and a regular panellist on CBC's The National with Peter Mansbridge. He also appears frequently as a guest commentator on a variety of other programs and media.

Comments

  1. Oren Gutman says:

    Preet, thank you again for the amazing opportunity!

    Whether you do decide to have a second podcast or not with us, we are more than happy to hear any and all questions, comments, inquiries or general hate mail from the listeners and we actually plan to construct an FAQ page to answer many of the concerns for everyone’s due diligence.

    Also, Mike from Money Smarts Blog was kind enough to allow me to repost the original article on our website so for anyone who would like to see what started all this controversy, you can find it on our website here: http://www.moneymechanics.net/2010/07/30/why-99-of-financial-advisors-should-be-shot-out-of-a-cannon/

    Cheers!
    Oren Gutman

  2. I’ve heard elements of this tax strategy before. It was employed by some of the charity donation tax shelters right down to “this is a completely different animal”. So, it will be wise to recall how CRA attacked the donation strategy. CRA took the position that there was no loan in the first place if all you are expected to pay are the first year’s interest costs. A taxpayer who participates in this strategy to the tune of $100,000 should keep in mind the downside. If CRA reassesses and wins, they’ll be out $16,000 in fees and interests plus the $30,000 in original taxes owing plus interest and penalties that CRA might see fit to levy.

  3. Alex C says:

    Well I made it through the whole thing, and I’m still fairly confused. Which I believe falls under the “don’t partake in what you don’t understand” rule. Good podcast and interview though. Thanks for posting this in its entirety.

  4. Great job on the interview, Preet. I learned the following:

    – The person offering his financial consulting services has been banned from an organization not known for its scrupulous ethics. As one other commenter put it, being kicked out of the MFDA is like being told you’re not fit to sell used cars.

    – The person selling a tax strategy admits he is “not a tax expert” and can’t clearly explain how the strategy works.

    – The person who came up with the strategy is a apparently a tax expert, but he has asked not to be identified. Or maybe he’s Lord Voldemort and we just can’t say his name out loud.

    – A fundamental part of the relationship is that you need to borrow money from He Who Cannot Be Named.

    – This professional service is marketed on a website operated by teenagers.

    What else is there to say?

  5. Mr. Cheap says:

    Preet,

    I’ve been *LOVING* this whole saga, PLEASE PLEASE PLEASE do a second podcast.

  6. Tim says:

    This guy lectures about how people need to have the facts before passing judgment but refuses to provide any of the important details behind the strategy in an “inappropriate” format like a podcast. If this is a viable and financially sound strategy why refuse to make this important information available to the public so we can decide for ourselves? He dodged Preet’s questions on the costs of membership fees/warranty, the underwriter/implementor, average loan amount and amount of his last deal. But then what do you expect from someone with a track record of having problems with proper disclosure?

    These guys aren’t tax experts or the originators of the strategy, and offer no ‘value add’. Their interest is entirely doing as many deals as possible before the CRA catches on and this ends up as another story on W5.

    Kudos to Martin for not paying his MFDA fine. The public needs to be reminded that self-regulatory bodies are completely ineffective and that most of the financial services industry lacks professionalism.
    Based on what I’ve read Preet appears to be in the minority so I hope he has the integrity not to let his blog be used as a platform for these guys to peddle their wares in a second podcast.

  7. Randall says:

    Fantastic interview Preet!

    My take on it is that anyone who hears the interview will gather that this is something and someone to avoid. Basically there are too many red flags (as originally suspected) and what amounts to an outright refusal to address them in any meaningful manner.

    Then, you (Preet) identified further red flags still. I think you would make a good detective – you essentially steered him into digging a deeper and deeper hole for himself.

  8. I was asked by some blog readers to take a look at some other tax schemes and what I’m finding in some cases isn’t comforting. In one case, clients of the scheme have had their claims denied and the promoters are in tax court, yet it is still operating a website and soliciting a business. And there may be a lag in CRA reacting, which can catch people out — i.e. the first year, their claim may go through so they do another claim in the next year or two at higher amounts only to have CRA clamp down retroactively.

  9. Dr. Watson says:

    I have a proposition for these clowns. Provide me with a $50,000 loan. I’ll take a certified cheque or bank draft and in return, I’ll pay you the first year’s interest plus your warranty plus your membership, which should add up to about $8,000. You can collect the interest for years 2 to 7 from whoever is underwriting the warranty. The warranty should also cover the principal repayment after Year 7. If you cannot provide a loan under these terms, your tax strategy is nothing but a sham designed to line your pockets at the expense of the greedy and desperate.

  10. Martin Horvath says:

    To provide some sort of basic idea via the telephone interview, I attempted to use familiar concepts to just approximate how the tax saving strategy works.
    Comments posted so far indicate that this seems to have failed and for this I apologize, but stress again that this exactly why we encourage people to review the program directly in an extensive step by step fashion and here I will add preferrably with visual aids.

    As per the above specific objection regarding employing a loan.
    The interest is paid every year during the 7 year loan, not just in the first year, other than if the participant is not able to pay it due to strenuous circumstances at which time the warranty will pay the interest.

    Also, the loan generates tax losses every year for the 7 year term.

    The tax losses combined with the interest, warranty and the membership, which are also paid every year, reduce income to the desired level of avoiding tax.

    It is also important to note that corporations can actually buy tax losses whereas individuals participate in the research eventually resulting in losses which flow through to them reducing their income.

    Lastly, the strategy is not registered as a tax shelter, it is a joint venture partnership business structure with the emphasis being on “business”.

    Thank you.

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