An investment scheme that’s become a cliched mystery plot attracts new interest in the digital age.
Most everyone reading this will probably not know what a tontine is, but they’re likely familiar with the concept. For example, a small circle of people are in a pool to determine the inheritor of a fortune and members of that circle start turning up dead. Sound familiar?
Tontines, according to the Washington Post, once represented a majority of the American insurance market, holding 7.5 percent of the nation’s wealth. Its name derives from an Italian banker who proposed the idea as a means of raising money for governments in the late 1600s. Groups of people would pay money into the tontine to fund an army or a public construction project and those participating would receive annual payments that would grow as other members of the pool died.
Today, tontines are illegal in the United States as a result of corruption, but the idea is receiving a little more attention from people who believe a modern look at the problems associated with tontines could make them worthwhile investments. So long as the investor doesn’t get hit by a truck at least.
One of those ideas proposed to modernize a tontine is to place its participants in a random pool. This would result in someone not realizing who is in the same tontine with them, which if anything would curb the desire to scour obituaries to find out if a tontine payment would increase and curb the idea that the perfect murder is a worthwhile investment.
What fascinates me about tontines is the fact that it almost makes people face the fact that they will die and essentially place a bet on the inherent belief that they will outlive other people. Basically, it’s perfect for millennials.
With a few changes, it could provide incentive for people to maintain their health, stop smoking, and get off the couch and exercise. Actively maintaining one’s health would become a financial investment in itself as a long life means a better chance at higher tontine payments. Yet, despite a lot of perceived benefits to tontines, there are some drawbacks to consider as well.
First, there’s the obviously slimy aspect that people essentially profit from others’ demise. While for many, that probably isn’t a big deal, a few people might have some problems with that aspect of a tontine. Another problem, is what’s done with the initial capital paid to join the tontine. Under the traditional setup for a tontine, the money paid to join a tontine were the funds used for construction projects and funding armies. The monarchy or government forming the tontine would make annual payments to tontine members. With an investment company running a tontine, that initial capital might go directly to that company, not to anyone involved in the tontine or their beneficiaries. In regards to beneficiaries, tontine payments stop after the member of the pool dies -- nothing is given to the person’s heirs.
For the foreseeable future, tontines will remain illegal, regardless of the discussion around them. While they were used as means of collecting income as a person got older hundreds of years ago, it probably would need extensive retooling to not only become legal investments, but attract people willing to pay into a tontine.
Until that happens, the only time anyone will hear about a tontine will likely be when a television writer needs a convenient plot device to kill some of their characters off.
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