News that Nathans Finance parent company VTL Finance is about to go under did not surprise me. I have been the unwilling target of their direct mail campaign for over a year now. The intensity of the advertising onslaught made me wary. One good communication expounding a good interest rate and a satisfactory level of security is worth more than a hundred badly composed communications expounding huge (read risky) interest rates.
In an attempt to see what Interest.co.nz rated Nathans Finance (their rating system was explained in the Sunday Star Times last week and warrants it’s own post) I did a search for Nathans and broke the site with a runtime error. Oh dear, perhaps Nathans has died along with it’s parent. (News Flash: the Nathans Finance website has been removed as well).
My condolences to all those who invested in it. Perhaps now is the time to put your money in a RaboPlus account.
What makes RaboPlus any better/secure?
It’s not a trick question… what makes them any better in the risk stakes?
Well, for a start they are the ONLY bank in New Zealand with a AAA rating from Standard and Poors.
They represent a relatively small degree of risk because payment is secured by a stable revenue source – in other words their cash reserves are big enough to cope in the event of a big payout.
In the case of Nathans Finance all of the money they got from investors was invested in the activities of one company, their parent, VTL. That company falls on hard times and there you go – bingo – there’s no cash reserve available.
On a final note, not even the New Zealand government is AAA rated.
Is that reason enough?
David Farrar started a lively discussion on Nathans Finance last week. Find it here.