{"id":723,"date":"2017-04-03T07:09:06","date_gmt":"2017-04-03T14:09:06","guid":{"rendered":"https:\/\/chaltenadvisors.com\/blog\/?p=723"},"modified":"2017-04-03T07:09:06","modified_gmt":"2017-04-03T14:09:06","slug":"dont-panic-moms-money-is-safe-with-an-advisor","status":"publish","type":"post","link":"https:\/\/chaltenadvisors.ca\/blog\/dont-panic-moms-money-is-safe-with-an-advisor\/","title":{"rendered":"Don’t panic, Mom’s money is safe with an “advisor”"},"content":{"rendered":"

Integrity has no need of rules – Albert Camus<\/p>\n

If it is not right, do not do it. \u00a0If it is not true, do not say it – Marcus Aurelius<\/p><\/blockquote>\n

Words to live by, no? \u00a0Unfortunately the financial services industry in Canada doesn’t tend to screen for existentialists and stoics. \u00a0I’d take Marcus Aurelius or Seneca as my financial advisor any day, even if they weren’t one of the rare advisors in Canada who are required by law to act in their clients’\u00a0best interest.<\/p>\n

The headlines have been ablaze in the last few weeks with furor over alleged\u00a0mis-selling at Canada’s banks. \u00a0 Most recently, CBC’s Go Public investigators published a piece about misleading job titles –\u00a0a grand conspiracy perpetrated by\u00a0the Canadian financial services industry in which the English language is\u00a0manipulated to dupe unknowing consumers. \u00a0(See:\u00a0‘I feel duped’: Why bank employees with impressive but misleading titles could cost you big time<\/a>)<\/p>\n

“What’s in a vowel?”<\/strong><\/p>\n

Specifically, the authors suggest that by calling their employees “advisors” with an “o” instead of “advisers” with an “e”, banks are intentionally\u00a0granting\u00a0staff license to engage in all sorts of nefarious product mis-selling and conflicted behaviour. \u00a0The article\u00a0cites the Small Investor Protection Association (SIPA). \u00a0SIPA would rather see much more stringent regulation of job titles to ensure that investors were absolutely clear about whether the professionals they consult about their finances are indeed required to look out for their best interest (a fiduciary relationship) or are simply product salespeople.<\/p>\n

The Canadian Securities Administrators (CSA) are currently evaluating many proposals to improve transparency and disclosure for investors, including a review of job titles. \u00a0I doubt clearing up the “o” versus “e” controversy is high on their list. \u00a0If I think of the first 5 fiduciary advisory firms (sorry, “advisery” is not a word) in Canada that I’d send my mother to, all of them use the spelling “advisory” with an “o”. \u00a0Yes, the grand homophone conspiracy makes for better copy but it cheapens the real issue.<\/p>\n

What is the real issue?<\/strong><\/p>\n

The SIPA research does contain\u00a0some interesting data points. \u00a0They found that in Canada, of 121,000 individuals registered to provide financial advice only 4,000 individuals<\/span> are registered in a category that requires them to act in a fiduciary capacity. \u00a0That balance does seem low relative to places like the United States. \u00a0Now of course just because an advisor is registered as a dealing representative\u00a0doesn’t mean they can’t or won’t act in their clients’ best interest and there are also fiduciary advisors who are compensated by commissions. \u00a0It’s not as simple as “adviser” vs “advisor”! \u00a0Investors have to educate themselves and be prepared to ask probing questions to truly understand the nature of the relationship they have with their current or prospective financial professional.<\/p>\n

What questions should investors ask?<\/strong><\/p>\n

We’ve come up with a list of as a starting point:<\/p>\n

    \n
  1. Do you have a fiduciary obligation to act in my best interest at all times?<\/li>\n
  2. How are you compensated by working with me?<\/li>\n
  3. How much are you compensated by working with me?<\/li>\n
  4. Does your firm provide any other direct or indirect incentive to you for selling or recommending certain investment or insurance products including non-monetary benefits such as prizes or trips?<\/li>\n<\/ol>\n

    You might even be so bold to ask for the breakdown of their compensation between different types of products (for example mutual funds sales vs. insurance vs. structured products) which might give you an indication of potential product biases that could impact what they recommend.<\/p>\n

    At the end of the day investors shouldn’t rely on job titles, regulatory oversight or even assurances from friends and family to vet the motivations of financial services professionals. \u00a0You need to educate yourself\u00a0and ask questions to ensure that you’re comfortable the advisor or adviser you’re dealing with is acting in your best interest.<\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    Integrity has no need of rules – Albert Camus If it is not right, do not do it. \u00a0If it is not true, do not say it – Marcus Aurelius Words to live by, no? \u00a0Unfortunately the financial services industry in Canada doesn’t tend to screen for existentialists and stoics. \u00a0I’d take Marcus Aurelius or […]<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,7,14,13],"tags":[],"class_list":["post-723","post","type-post","status-publish","format-standard","hentry","category-all-posts","category-graham-bodel-posts","category-investment-industry-issues","category-regulation"],"_links":{"self":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/723","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/comments?post=723"}],"version-history":[{"count":2,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/723\/revisions"}],"predecessor-version":[{"id":725,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/posts\/723\/revisions\/725"}],"wp:attachment":[{"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/media?parent=723"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/categories?post=723"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chaltenadvisors.ca\/blog\/wp-json\/wp\/v2\/tags?post=723"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}