Are advisors professionals, or salespeople masquerading?

[admin]

rom: Ken Woodard
To: ken
Sent: Wednesday, January 27, 2010 3:28 PM
Subject: Request for Information

Mr. K

Shaun Devlin asked me to respond to your question regarding business titles. MFDA Rule 1.2.1 (e) prohibits the use of misleading business titles, qualifications and designations. While the MFDA does not mandate a specific title given the various number of acceptable titles, professions, designations and qualifications in use by its 75,000 Approved Persons, we do review business cards in the normal course of our examinations to assess compliance with MFDA Rule 1.2.1 (e). Any instances of non-compliance are addressed at that time. Currently there are no public enforcement proceedings in process with respect to MFDA Rule 1.2.1(e).

In your email you reference the fact that business cards you have seen do not mention “registration designation”. Securities legislation (except for Quebec) and the SRO Rules of IIROC and the MFDA do not mandate the sole use of an individual’s category of registration. Given all salespersons for all types of dealers are considered “dealing representatives” under National Instrument 31-103, such disclosure would not be particularly useful for investors. In Quebec, while NI31-103 still applies, they also have additional local requirements given their combined role as regulator for insurance and securities activity in the province.

Thanks

Ken


Ken Woodard
Director, Communications & Membership Services
Mutual Fund Dealers Association
121 King Street West
Toronto, ON M5H 3T9
(t) 416-943-4602
(f) 416-943-1218

[admin]

DOES ANYONE, ANYWHERE KNOW OF A PERSON WHO IS REGISTERED AS A "SALESPERSON" OR A "DEALING REPRESENTATIVE" (THERE ARE 130,000 IN CANADA) WHO ACTUALLY INFORMS CUSTOMERS THAT THIS IS THEIR REGISTRATION? ALL MISREPRESENT THEIR ROLE, THEIR LICENSE AND THEIR COMPENSATION BY REFERRING TO THEMSELVES AS PROFESSIONAL ADVISORS) 13 SECURITIES COMMISSIONS SEE NO EVIL.

Dear Mr. Elford,

The provisions of the law that may apply to your questions have been referenced or reproduced for you. OSC staff may not interpret or apply the law for you or give you legal advice about situations you believe may occur. If you need assistance to understand how the law applies, you may wish to consult your own legal counsel.

In the situations you describe, such persons would not necessarily be acting contrary to securities law requirements. As set out in subsection 44(1) of the Act, such person must (1) be representing that he/she is registered under the Act, and (2) such representations must be untrue to be a breach of this provision. Also, when representing that such person is registered, the person must specify his/her category of registration.

Again, if you wish to provide us with substantive evidence of a specific potential breach of Ontario securities law, we will review it. Please also note, that the self-regulatory organizations who directly regulate the conduct of investment dealers and mutual fund dealers, the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) respectively, would have regulatory jurisdiction to investigate complaints relating to conduct of their member dealers.

Once again, should you require specific legal advice in understanding how the law applies, you should consult with your own legal counsel.

Sincerely,

Jeffrey Fennell
Senior Inquiries Officer
Ontario Securities Commission
inquiries@osc.gov.on.ca
416-593-8314
1-877-785-1555

The information in this e-mail should be taken as a guide. The content is not intended to provide investment, financial accounting, legal, tax or other professional advice and should not be relied upon or regarded as a substitute for such advice. We recommend that you seek advice from a qualified professional adviser before acting on the information or content appearing in this e-mail or any information or content on a web site to which a link has been provided.


From: larry elford <lelford@shaw.ca>
To: inquiries@osc.gov.on.ca
Date: 02/01/2010 05:48 PM
Subject: Re: Registration - #220100119-18892




Thank you Jeffrey,

I admit that I indeed may not correctly understand your response. I would ask that you help me with each question instead of referring me to sections of an act, or to definitions, since I am not trained as a lawyer. I seek to provide an informed response to the question of "whether or not it is an offense under the act for a registrant to represent themselves as something other than the registration category that they are licensed in?"


The reason I ask this, to give a clarifying example, is that I have found in the past, that while there may be nearly 130,000 persons who up until Sept, 29, 2009 may have been registered and licensed as "salesperson", I have yet to meet one who represents this properly to customers in their marketing material or to the public in their advertising. Am I to assume that they were all not following the rules of proper disclosure? (question)

Secondly, now that most of these registrants have had their registration and license category changed to one of "dealing representative", I find than virtually NONE of these persons are today identifying themselves properly in his or her category of registration. So I guess I could use a bit of clarity, charity and help on your part to clear up my obvious confusion, and I will repeat the question that "are these people in violation of the act if they do not identify themselves properly in their category of registration? (question)
Business cards? Letterhead? Advertising? Are all these representations considered areas where each person is required to specify his or her category of registration? (question)

thanks for your patience jeffrey

best regards

larry elford

On 1-Feb-10, at 3:26 PM, inquiries@osc.gov.on.cawrote:


<mime-attachment.gif>
Dear Mr. Elford:

I acknowledge receipt of your most recent inquiry to the Ontario Securities Commission (OSC) concerning registration and the term "adviser".
1. We addressed the issue of the registration category "adviser" in our January 19, 2010 reply to your January 17, 2010 inquiry. We referenced the provisions of subsection 26(6) of the Act which describes the categories of registration for advisers, as well as Appendix A to CSA Staff Notice 31-311 which is a chart showing the previous and new categories of registration.
2. It appears you have not correctly understood our response regarding the requirement to disclose registration categories correctly. We recommend that you carefully review the sections that we reproduced in our earlier response. The provision in subsection 44(1) states that "No person or company shall represent that he, she or it is registered under this Act unless the representation is true and, when making the representation, the person or company specifies his, her or its category of registration."

Please note that OSC staff may not provide legal opinions or interpret the law for you, and again, if you have substantive evidence of a potential breach of Ontario securities law, we would be pleased to review it.


Sincerely,

Jeffrey Fennell
Senior Inquiries Officer
Ontario Securities Commission
inquiries@osc.gov.on.ca
416-593-8314
1-877-785-1555

The information in this e-mail should be taken as a guide. The content is not intended to provide investment, financial accounting, legal, tax or other professional advice and should not be relied upon or regarded as a substitute for such advice. We recommend that you seek advice from a qualified professional adviser before acting on the information or content appearing in this e-mail or any information or content on a web site to which a link has been provided.

From: larry elford <lelford@shaw.ca>
To: inquiries@osc.gov.on.ca
Date: 01/21/2010 04:50 PM
Subject: Re: Registration - #20100119-18892







Thank you Jeffrey, if I might pose a follow up or two for you:

1. There used to be a license category titled "advisor" or "adviser". Does this title or license category still exist and if not, when was it cancelled or changed. What is it, or was it for?

2. If I understand you correctly, it is an offense under the securities act of Ontario to fail to properly disclose the category of registration of a registrant? Do I have that correct?

Thanks again Jeffrey

larry
On 21-Jan-10, at 2:12 PM, inquiries@osc.gov.on.cawrote:

Dear Mr. Elford:

Thank you for your follow-up inquiry to the Ontario Securities Commission (OSC) concerning the use of the term "advisor" and how it relates to subsection 44(1) of the Securities Act (Ontario) (the Act).

Ontario securities law does not seek to regulate use of the term advisor in all circumstances. It is a commonly used or generic term. The purpose of subsection 44(1) of the Act is to ensure that people who represent that they are registered under Ontario securities law, do so in a manner that also states their category of registration.

If you have substantive evidence that a person has represented themselves as registered with the OSC but failed to properly disclose their category of registration, we would be pleased to review that evidence.

Please note that OSC staff cannot provide you with an interpretation of law or application of the law. If we receive substantive evidence of specific actions that may be in breach of Ontario securities law, that evidence will be reviewed. However, we do not comment on hypothetical situations.

Sincerely,

Jeffrey Fennell
Senior Inquiries Officer
Ontario Securities Commission
inquiries@osc.gov.on.ca
416-593-8314
1-877-785-1555


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This message is intended only for the use of the addressee and may contain information that is privileged and confidential. If you are not the intended recipient or have received this communication in error, you are hereby notified that any unauthorized use or disclosure is strictly prohibited. Please notify the sender immediately and delete the original without making a copy or disclosing its contents.

Le présent message s'adresse exclusivement à son destinataire et peut contenir des renseignements privilégiés et confidentiels. Si vous n'êtes pas le destinataire de ce document ou si vous l'avez reçu par erreur, vous êtes par la présente avisé qu'il est strictement interdit de le divulguer ou de l'utiliser sans autorisation. Veuillez en avertir l'expéditeur immédiatement et détruire le message original sans le copier ou en révéler le contenu.

[admin]

Presentation to the Liberal Party February 3rd, 2010 Parliament Hill
My family & I have been victims of a financial crime; I have lost complete faith in the power and will of the government to correct the situation that led to my loss. It has been almost five years since nearly two thousand investors across Canada have lost $250 million from an alleged Ponzi scheme or so-called “hedge fund” which we were told was a “conservative, long-term investment” NORSHIELD. NO JUSTICE. NO RESTITUTION. No mandatory errors and omissions insurance to compensate investors and/or weed out wayward, unsophisticated, commission-driven so-called “advisors” albeit “registered salespersons” There have been only what appears to be intentionally pointless, costly hearings by provincial regulators at taxpayers’ expense. No RCMP FINTRAC or other police investigations into Canada’s largets so-called “trusted bank” Royal Bank of Canada’s involvement in Norshield, nor Bank of Montreal’s involvement as Guardian of Norshield investments. Nor has the auditor KPMG been held ACCOUNTABLE for its role in this fraudulent scheme yet enormous sums of monies have been siphoned by a court-appointed receiver or “trustee” RSM Richter and law firm “Stikeman Elliot” with no recourse anywhere in Canada for a wronged investor, we must resort collectively, to a costly and time-consuming class action suit when the governments and self-regulatory organizations have failed the Canadian public many times over. We need a political party which can demonstrate that it can lead us out of the woods on these important issues with some well-thought out policies and is willing to organize the necessary engagement structures to listen to the citizens of Canada. We have what I believe is an intentionally corrupt, fragmented regulatory regime designed to protect the financial industry NOT Canadian retail investors.
Marcia O

Advocate comments.......she speaks clearly and accurately as to how the system is designed to prey on Canadians, rather than serve them. I suggest regulators should be taken to court with class actions for failure to provide honest services, negligence and breach of trust. Easily proven in my opinion.

[admin]

$1000 REWARD designed to help clean up misrepresentations in the Canadian investment industry.

$1000 cash paid TO THE FIRST PERSON IN CANADA WHO CAN SUPPLY investoradvocates.ca CLEAR, CONCISE, UNDERSTANDABLE ANSWERS FROM ANY CANADIAN INVESTMENT DEALER OR INVESTMENT REGULATOR TO THE FOLLOWING QUESTIONS:

What is the exact license category with the provincial government of the majority of employees who sell investments? "dealing representative"
What was this license category name prior to 2009? "salesperson"
Why was the official license category of 130,000 persons changed in 2009? Potential legal liability for allowing 130,000 "salespersons" to misrepresent themselves as "advisors"
Why do they not show/display a license in thier offices? would you display a license that said you were a "salesperson", or a "dealing representative?"
Are they required to reveal to customers how they are licensed? Yes, according to securities commission rules, IIROC and MFDA rules, but rules not enforced since all salaries of those organizations are paid by the investment industry
How do the majority of ads, business cards, correspondence identify them? "professional advisors", "trusted advisors", Certified Financial Planners, anything but what they are licensed as.
Are there industry rules or codes regarding how they represent themselves or against misrepresentation of themselves to the public? Please provide. YES, See securities acts, self regulator rules, again not enforced due to serious conflicts of interest by Canadian regulators eg. OSC...The provision in subsection 44(1) states that "No person or company shall represent that he, she or it is registered under this Act unless the representation is true and, when making the representation, the person or company specifies his, her or its category of registration."
Do they owe your customers a duty of care to place the customer interests ahead of their own or the firm? Please clarify. So far all investment sellers have desperately avoided giving the public an informed answer to what duty they owe the public, it allows them to have it two ways.....one way that they promise, and a separate way when they do wrong and have to defend themselves. The words and deeds do not match.
Do they owe a fiduciary duty to their customers? Please clarify? Training manuals (securities Institute etc) say yes, strongly defended court cases say no
Do you inform the customer whether they are in a trusted professional advisory relationship or do you indicate that it is a salesperson/buyer relationship? Never
Do you have a code of ethics which elaborates on this? Yes, but the code does not have to be followed, just written and placed on the wall to admire.
Can you state or show the industry rules and self regulatory rules on titles, on fiduciary duty to clients, duty of care? Never
Do you provide your customers with anything in writing showing them of the duty of care they can expect when dealing with you? (such as some realtors do) Never
Are you required to warn your customers when you may be acting on both sides of the transaction? (like realtors are) (dual agency) Never

If they cannot answer these questions about their own disclosure process, should you really be trusting people who just say “trust me?”?

Answers are already posted at http://www.investoradvocates.ca under the flogg topic titled, “are advisors professionals, or salespeople masquerading?”
Industry answers will be posted as and when provided.
Payment will be made personally by http://www.investoradvocates.ca, founder and director Larry Elford

[admin]

Carrigan: Financial planning designations grow on trees



February 06, 2010

By Bill Carrigan Investments Columnist

Most financial writers know the easiest way to stimulate their readers is to simply ridicule the gold bugs. I confess to engaging in gold-bug hazing over the years and generating the predictably angry reaction. It appears my recent item on the financial planning industry ruffled a few feathers. It has also generated many questions on the various advice categories.

The problem is the confusing layer of registration categories and proficiency levels that the investment industry serves up to the public. For starters, investors should understand that most industry professionals are sales and marketing people, with a variety of investment-related skills.

Think of the financial-services industry as a manufacturer of investment products – and think of private investors as the buyers of investment products.

And keep in mind that today's financial services industry is a relatively new creation that was spawned in the early 1980s. Before that time there were distinct divisions in the services offered by the industry players.

n You purchased stocks and bonds from a broker.

n You bought insurance from an insurance agent.

n You bought mutual funds from a mutual funds sales representative.

The early 1980s was ground zero for the great 20-year secular advance in global stock prices – and the financial planning industry. Boomers began to ask their brokers financial planning-type questions – questions few of them were capable of answering. This opened the door to financial planning, using financial factors such as insurance, retirement planning, estate planning and education planning.

The adviser food chain became even more complicated due to the big banks' entry into the financial services industry to offer one-stop shopping

1. At the bottom of the sales/adviser food chain are the front-line bank branch mutual fund sales representatives.

2. Next is the in-house financial planner. These advisers are subject to tight, centralized restrictions and their mandate is to do no harm, sell in-house products and keep the institution controversy-free.

3. Advisers at that level will not be permitted to attempt any type of security analysis.

Some of these sales people/advisers will aspire to move up the food chain and become fully licensed investment advisers. The investment adviser will have to complete a series of industry studies, with some institutions also requiring a rigid training program. This is where the creativity and latent investment talents of the adviser are set free because security analysis is permitted and expected by their customers.

Some investment advisers will deal only in mutual funds, along with common stocks and bonds recommended by their own research department. The more experienced advisers will adopt their own strategies using options, exchange-traded funds and futures contracts.

Some will partner with other in-house skill sets such as insurance and accounting experts and form an in-house management team. They may charge a fee calculated from the percentage of assets under management. In most cases the client/adviser relationship is non-discretionary – meaning the client must approve every investment decision

At the top of the adviser food chain we have the associate portfolio manager and the portfolio manager. These advisers will provide discretionary portfolio management services and are typically found running their own money management firms. These advisers will often carry designations such as CFA, CA, MBA and CIM.

In each example of the adviser food chain the adviser has a fiduciary duty to the client/investor. However, if you go the online discount broker route, you're on your own because the broker has no obligation with regard to suitable investment products.

Our chart this week is the weekly closes of wealth manager Gluskin Sheff + Associates Inc. from the initial IPO of June 2006 to date. The high volatility of the stock price is suggesting a volatile business wherein clients remember only your last quarterly return.

A reasonable person could assume the owners of this business are taking on more risk than their customers.

Bill Carrigan is an independent stock-market analyst. He can be reached at: info@gettingtechnical.com

[admin]

February 07, 2010


By Ellen Roseman Personal Finance Columnist

Where do you go to complain about an investment or about the person who sold you the investment?

Wish I could tell you in a sentence or two.

Canada has 13 securities regulators, one for each province and territory. The Ontario Securities Commission oversees public companies, mutual funds and registered portfolio managers.

However, the salesperson or firm you deal with probably comes under the jurisdiction of two self-regulatory organizations.

· The Investment Industry Regulatory Organization of Canada (IIROC) oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.
· The Mutual Fund Dealers Association of Canada (MFDA) oversees the distribution side of the Canadian mutual fund industry.
These self-regulatory organizations protect investors if member firms become insolvent. IIROC has the Canadian Investor Protection Fund, while the MFDA has its own Investor Protection Corporation.

Both accept public complaints and follow up with possible disciplinary action against members. But if they find any wrongdoing, they rarely provide any redress.

For compensation, you have to go to the Ombudsman for Banking Services and Investments (OBSI). It's supported by member firms, including those that belong to IIROC and the MFDA, as well as banks and some credit unions.

OBSI can ask members to pay up to $350,000 to investors with well-founded complaints. However, its decisions are kept secret.

OBSI takes about six months to do an investigation This could be a problem if you wanted to go to court afterward, since Ontario has a two-year limitation period to take legal action against an investment firm.

Luckily, Ontario has a law that says bringing a complaint to OBSI "stops the clock," which means the limitation period for lawsuits is suspended until the investigation is completed. (Not all provinces do this.)

For complaints about life insurance products, including investments in segregated funds, you have to seek redress from the OmbudService for Life and Health Insurance (OLHI).

And to talk to a regulator, you have to call the Financial Services Commission of Ontario (which oversees investment products from life insurance companies and insurance sales).

Since the system is so fragmented, the federal government has set up the Canadian Securities Transition Office (CSTO) to lead the way to a single securities regulator. It's supposed to present a plan in July.

However, the CSTO lacks participation from three major provinces – Quebec, Alberta and Manitoba – which are staying outside for now.

Another problem with the current system: Not all firms and people selling investments come under the watchful eye of a regulator or a self-regulatory organization.

If you deal with someone operating without registration, you have no access to disciplinary measures or redress when you lose money. You're on your own. To see if someone is registered, visit www.osc.gov.on.ca.

You can also search for names of people who've been disciplined by securities regulators at the Canadian Securities Administrators website, www.securities-administrators.ca.

IIROC and MFDA supply their own information about disciplinary actions, so you have to check their websites as well, www.iiroc.ca and www.mfda.ca.

Next week, we'll look at some specific cases of investments that fall between the cracks.

eroseman@thestar.ca


(Advocate comments: bravo to the first media writer in canada to correctly identify the most common investment industry employee as "salespersons". It is the first step in public awareness towards stopping financial misrepresentation.)

[admin]

TheUnbiasedPortfolio.blogspot.com/

New blog reflects upon "advisor risk" and more

Mike

Mike Macdonald, B.A. (Econ), FMA
Vice President, Consulting
Weigh House Investor Services



Mike Macdonald

Sunday, February 7, 2010

Risk: What my salesperson forgot to mention!


Salesperson Risk: While I have lapsed into using the term advisor, your advisor or financial planner is actually a licensed salesperson. They typically earn money through collecting commissions which are often not disclosed to you even though you will pay the commission either directly (broker commission, flat fee) or indirectly (fund trailer fees, hidden fixed income fees, new issue fees). Most salespeople are paid to gather clients and are rewarded for getting your money into a mutual fund or generating fees off that money. Very few (think basically none) are paid a fee to manage your investments effectively. Whether you make or lose money has very little impact on the income of your salesperson so long as you do not leave the company he works for. Trusting your salesperson to effectively manage your money is a huge risk. Why do you think your salesperson buys mutual funds? It is because they do not know how to properly manage investments themselves.


Individual Security Risk: This risk is commonly called "un-systemic risk" and it refers to the concept of having too much risk in any one security, sector or industry. If you buy individual stocks you take un-systemic risk which can typically be minimized by holding 30+ securities. The catch is the 30+ securities also need to be diversified by geography, sector, and industry. Holding 30 small cap companies is less risky than holding 1 small cap stock, but it is much riskier than holding a mix of small cap, mid cap, and large cap stocks. Similarly you should diversify by asset class (holding bonds as well as stock and cash is a good start). If you have an individual holding that is more than 5% of your portfolio you should look at the security risk and decide whether cutting back on the security might be prudent. (I make an exception if it is a government bond).



The purpose of this blog is to have investors take ownership of their personal "risk" tolerance. To do so you need to understand what your advisor/salesperson is talking about when they mention risk. Many supposedly qualified advisor / salespersons have talked about their clients reassessing the risk tolerance they have. The suggestion is that "clients overestimated their risk tolerance". Nothing could be further from the truth. Your risk tolerance does not change based upon portfolio performance because it is hard wired into your personality. If I had told you the amount of money you were going to lose before the market dropped you would likely have said "no way" because your salesperson / advisor would not leave you exposed to that size of a loss. You likely never understood the risk profile of your portfolio and your salesperson knew that. They understated the market risk you were exposed to and now they are pointing the finger of blame on you for not realizing you should never have trusted their rosy forecast to begin with. They knew that losses were emotionally devastating because they studied the Prospect Theory. Unfortunately they were motivated by the Modern Commission Theory and you were the ticket to their big commission.

Fool us once, shame on the salesperson.....fool us twice.......


soismike

Friday, September 4, 2009

Who Is Fighting Against Modern Commission Theory



It is encouraging to see the number of organizations and ex-industry veterans who continue to lead the charge against what we view as the greedy and unethical majority in the investment industry.

More advocates seem to jumping on board every day. In fact the advocacy boat is getting so full it might well sink under its own weight.

So who are these advocates and what should they do?

Lets first frame the issue as viewed by SOIS Mike, and then look at the players in the world of advocacy.

THE ISSUE:

The Modern Commission Theory holds that the actions of ‘salespersons’
are directly driven by the ability to derive maximum revenue.

Any suggestion that ‘salespeople’ work in the interests of clients to mitigate
risk and / or ensure suitability is naïve at best and most likely is deceitful.

THE PLAYERS:

In an effort to sort out the playing field I have categorized some of the key players on the advocacy front (my opinion only of course) below

n infiltrators (infil-traitors?):

… groups that on the surface are there to help!


The Ombudsman Office of each of the major banks:

The banks are not the nicest people to deal with at the best of times!

But they are amongst the cleverest of the investment folks. Outwardly they have convinced many clients that they have an army of compliance folks just waiting to jump on any trade that is not a perfect match to the client’s needs and risk profile. In fact the compliance folks serve a much more important role in the banks. They are the canary in the coal mine. Complaints come in and are regularly assessed to see what damage they might do to the bank profits and bank reputation. If your claim is deemed to pose little risk you should not be surprised to get a quick note back to you saying your case has been reviewed and you signed and acknowledged the actions of your advisor/manager and thus have no claim.

In fact, the in-house compliance folks at a BIG Bank do a great job of training bank staff to ensure you signed the forms in such a fashion as to minimize bank risk. The problem is the forms are supposed to minimize your risk not the banks! Your complaint provides the bank with all the details they need to build a case against your claim. They have many experts and you are pretty much on your own.


Self-Regulatory Bodies:

The folks at the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA) attempt to provide consumer education and basically a friendly face to anybody looking for information on investing. Enough said about self-regulatory organizations (SRO’s) in the past; suffice to say beware strangers offering candy.

In the world of investments you need to ALWAYS follow the money trail.

Who is paying for whom to do what to whom?

SRO’s are member-paid and industry-funded to ensure the most egregious issues are dealt with and buried before the industry gets a black eye.

The day to day slashing and high sticking do not get any attention from these referees.


Nice Guys Finish Last:

This group represents the folks with good ideas and a good heart, but they are entering a gun battle with only a dull knife to defend themselves.


F.A.I.R.: Canadian Foundation for the Advancement of Investor Rights

This group is relatively new and as stated in the past, I do not like their chances of making meaningful change without a regulatory cannon to threaten the powerbrokers in the industry. The approach of keeping a watchful eye on the industry can only drive change if FAIR can harness the media. The ability to harm reputations can get the attention of the industry; however, again we must follow the money. The media will support the ideals of FAIR but only up to the point it causes stress in the advertising budget when a big bank / investment dealer / mutual fund advisor threatens to pull an advertising. – www.faircanada.ca/en/


Media:

Within the media, there are folks who know right from wrong (well, within the business section anyway). The journalists who challenge fund fees and hidden costs and lack of disclosure are brave souls indeed. They depend on the investment industry for the revenue that keeps the paper / TV station going and keeps them employed. The net result has not been that they sell their souls for ad revenue (at least some of them do not), but their ability to criticize is limited to the generic issues. It is hard to point to a single firm like Investors Group and say “hey, your MERs are way too high”, but they can point to the industry as a whole and do in fact do so on occasion.

Unfortunately many are cheerleaders for the industry and a consensus approach will never happen as long as the media battle for ad revenue.


OBSI Ombudsman for Banking Services and Investments

The banks are powerful masters in the Canadian investment scene. With their own Ombudsman offices being ineffective (even the politicians did not fall for that one), an ultimate Bank Ombudsman was set up in 1996 to handle the investors not completely overwhelmed – 100% satisfied by the resolution / restitution offered by the Bank’s own in-house Ombudsman.

Unfortunately, abused financially consumer / investors need to go through the bank’s in-house sham in order to get their complaint elevated to a truly impartial arbitrator at OBSI. How good are these guys......well RBC has stopped dealing with OBSI for banking complaints because they found the Ombudsman was actually listening to the complaints and making sound recommendations that cost the RBC real money! Clearly RBC could not allow that to continue!

So RBC took their ball and bat and set up their own cosy game. Good luck with those RBC complaints! The issue here is clear to see.

The OBSI simply cannot force investment dealers to toe the line. As to why the bank would have an option to back out of this government driven approach is a question for another day. The OBSI clearly states they do not act as an advocate for investors....the scary thing is they might be as close as we get to a true impartial advocate.

Of course, follow the money – OBSI is funded by its participating banks and securities dealing firms.....does this conflict never end!


The Don Quixotes’

In this category I include all of us who knash our teeth at the investment shenanigans but who have neither media clout not enforcement powers. While we are too many to name, you only need to go to a bank board meeting to see somebody stand up and challenge the status quo. Below is a short list of people who continue to tilt.

I exclude myself from the list, not because I do not tilt at windmills, but compared to the folks below, I have accomplished nothing worthy of being included.

The folks below continue the battle with long odds against them. They rile the giants and annoy the heck out of the pretenders in the industry. They just do not give up no matter the odds, the lack of power, and the lack of clout!....and of course, lack of money!

Larry Elford: http://www.investoradvocate.blogspot.com/


Joe Killoran: http://www.investorism.com/


Stan Buell: http://www.sipa.ca/


Ken Kivenko: http://www.canadianfundwatch.com/

If you look at the sites noted, you will understand that the power of the collective efforts is leveraged by the exposure provided by the internet. The internet however is unfocused and hard to motivate for a single cause. (Unless United Broke Your Guitar of course).

So what are advocates to do?


FIGHT MONEY WITH MONEY: The Political Solution is

n “Money = Power = Money”

The key, if not yet obvious, is to follow the money!

Politicians get elected by fanning the flames of issues to motivate voters, who in turn vote for the politician and thus give them access to the money! Most voters are totally disillusioned by the investment world and how it operates. GREAT! That makes it a top of mind issue for politicians!

Our only hope of making meaningful change is to have a political solution.....why?

Because politicians trade power for money!

And the only way to deal with the powerbrokers is to have more power.... and the only one with more power than the investment world is the political world. And they will only use the power in return for THE MONEY!

In short, the message to all advocates is focus on the politics (as disgusting as it may be to many) because the regulatory approach just does not work!

Instead of bringing our dull knife to the gun fight, we need to borrow a tank from the government and resolve this issue for good!

You’re “not likely to in my lifetime” – author....SOIS MIKE

Posted by sois mike at 12:29 PM
Labels: Who Is Fighting Against Modern Commission Theory


Sunday, July 5, 2009

Investor Hopes: Canadian Security Institute or Investor Advocates




Grey Knights and Mixed Messages:

n The Canadian Securities Institute or Investor Advocates


Mike Macdonald

As I look through the massive reams of media commentary on Investor Education and the flurry of activity from so-called SRO’s and other industry shills, two questions come to mind:

1- How did Canada, a well educated, conservative, rational nation of mostly honest people end up with such poor consumer protection and awareness in the area of investing?

2- Who is going to be the white knight that will expose the flaws in a multi-billion dollar industry that does not want to change?

The questions are quite simple; the answers a lot more vague than I would have thought. To set the scene lets first acknowledge that much of what is wrong is the result of entrenched financial interests.

n Things do not just happen....people have agendas and set out to make things the way they are.

Having said that; it also appears that some people with great intentions have added to the problems they were trying to fix. A primary reason seems to be that the white hats always focus on changing the consumer behaviour while remaining either helpless to deal with the industry or unable to find a strong regulatory body to act for the consumer against the industry.


So, on to question number one; How did we get here?

Since investor education is considered a current buzz word, let’s focus on the body that claims to educate both the advisors/brokers/salespeople as well as the public. The Canadian Securities Institute is a company that sells courses required for people to enter the financial securities industry. They also provide courses on securities and investing for the average investor as well as financial planning courses. There is a very good chance your investment advisor and insurance agent have taken a CSI course to get licensed. Thus we have the source of much of the training that has given us the advisors of today in one spot, managed by one firm with a pure education mandate! So that appears to be strength, right. But when you scratch the surface things are more grey than black and white.

The Canadian Securities Institute makes more money by attracting more people to the industry and thus providing more courses. They also make more money if the mutual fund firms are happy with the process and send all the new recruits to the courses.

n Thus the courses are “mutual fund friendly”.

Sample from a wealth management course: “An investor is looking to invest money for two years and is offered a 10% return by a mutual fund....” Let’s stop right there! This is a course for wealth managers (Wealth Management Techniques) and

n it uses an example of a 10% mutual fund return over a 2 year investment horizon!

That might seem like a moderate return to a hedge fund like the one that financed the privatization of the CSI, but a couple planning on using the money in 2 years should never be in a hedge fund. The assumptions are clear; mutual funds offer options such as guaranteed 10% returns and clients with a 2 year time horizon before a major purchase should look at mutual funds. The course does not clarify what type of fund offers such a deal of course! It is little wonder new advisors think funds are a bullet proof way to get rich when the advanced planning courses they take teach them just that!

As stated, nothing in the industry is ever all bad or all good. The CSI does teach ethics and does a good job of teaching the benefits of diversification and of explaining the workings of many securities

n The main challenge is that the educational industry is intricately tied to the fund industry and is not in an independent position to expose the issues and challenges that come with funds.

In many subtle ways (as in the above example) the institute has given in to the fund industry and abdicated the educational independence required to provide critical comparisons of competing strategies. That's why our education system has public funding and not corporate ownership; otherwise Coca Cola would be taught to be health food!


Question 2: Who will be the white knight?

Independent consumer advocates are our only current hope! Amazingly, it is refugees from the fund companies who are its biggest critics and who are opening the doors on the industry’s activities. Warren MacKenzie, an ex-insider, wrote the Unbiased Advisor which is an expose on how advisors exploit investors. (Disclaimer; I work with Warren)


As the likes of hard-line investor advocates Joe Killoran and Ken Kivenko rattle the chains of politicians and the regulators; small parts of the industry are being exposed to light. The media plays a big, if somewhat conflicted, role as well. Consumer advocates like Ellen Roseman, Rob Carrick and Jonathon Chevreau tread the line of exposing the bad parts of the industry while realizing fund companies advertise a lot in their papers. William Hanley from the National Post has written very direct articles on the industry shortcomings as well.


Unfortunately, I suspect the above advocates will never be in the same room together due to some strong personalities and significant differences of opinion. Nonetheless, they will continue to push the envelope (Ken and Joe) and build on the small gains (the media folks) and collectively they will move investor advocacy forward. As for Warren, he is trying to change the industry from the inside with a radical new advice model that may or may not gain traction.

Where will F.A.I.R. land in this mix? Too early to say as they have not really shown their true colours yet, just the tangle of connections to the industry money that makes me so nervous.


Are we winning? No.

Will we win? I do not know.

Will the above folks quit the battle and surrender? I hope not !

Tilting at windmills.....sois mike


TheUnbiasedPortfolio.blogspot.com/
Eventually, an advocacy group will gain real punitive powers, until then it is good folks tilting at windmills!


Mike Macdonald

Thursday, June 11, 2009

WHY I FEAR F.A.I.R.!




F.A.I.R. OR NOT FAIR?

I WOULD GRADE THEM

n FAIR AT BEST!



The Canadian Foundation for the Advancement of Investor Rights (F.A.I.R.) was launched in September of 2008. Undoubtedly you have been as overwhelmed with their good work as I have!


Ermanno Pascutto, the Executive Director, has raised the funds ($3.7 million) necessary to launch the Foundation from IIROC; and of course IIROC is a merged entity created by Investment Dealers Association (IDA) and the Market Regulatory Services organization (MRS). We are delighted to see that such distinguished investor advocates are willing to back this venture!

For those of you without a sarcasm detector, the Investment Dealer Association and MRS are two of the very good reasons we need an advocate for the investing public. Both are “self regulatory bodies”, which in the investment industry seems to mean they help ensure the big players run the industry without having to worry about real regulatory bodies constantly demanding they do what is right for investors!

The goals of an organization often provide some insight into how they will carry themselves in the process of assisting you and me. As an investor advocacy group I would expect that the foundation would

n “provide clear policies for immediate implementation”,

n “demand action on outstanding issues”, and

n “fight to ensure investors are treated fairly”!


In fact F.A.I.R.’s primary goals include such hard hitting items as:

o “making reports”,

o “proactively identifying trends”, and

when bad stuff happens to investors they will

o “encourage action”!


So, you just lost your pension money in the market, discovered the advice you received was suitable for either an 18 year old with $40.00 to invest or a gazillionnaire looking for losses! You are mad, frustrated and most importantly broke!

n Your Advisor referred you to his boss, the Investment Dealer, who said tough luck buddy.


n You complain to the ombudsman for the dealer (if they even have one) but again, tough luck! !


n You can go to the Ombudsman for Banking Services and Investment (OBSI), again good luck!


n The IIROC folks appear to have no interest in the matter and the local paper agrees you got shafted but it is so common it’s not even news.


n So you head to the F.A.I.R. folks and say THIS IS NOT RIGHT!


So what can we expect? Based upon the goals of the foundation it may look like this:

Yes, we have identified that a trend that appears to be emerging is that you and your fellow investors are getting shafted on suitability. As a matter of fact we are preparing a report as we speak outlining this trend and also encouraging the IIROC to review their files and see if they are seeing a similar trend. If so we can assure you we will suggest they take some action at an appropriate time to make things somehow better. We want to be careful of course not to do anything drastic that might imply our “one time” funding (nudge, nudge, wink, wink) was being utilized to serve the one sided needs of the powerless investor at the expense of the well funded industry big boys!

What do we need? A great response to an investor would be something like this:

You are right, you have been shafted along with hundreds of others who have called and emailed us with their concerns.

We are preparing a press release naming the major offending firms and demanding a meeting with the Presidents within the week.

If it does not happen we are launching a media blitz and a letter/email campaign to all MPP’s and MP’s.

We are also going to be sending registered letters to the independent members of the Board of the firms who are the greatest offenders based upon our data.

We have begun to raise funds to support a class action suit against the major brokerage firms and mutual fund firms for return of hidden fees and lack of disclosure of fees in plain English/French.

The advisors have been knowingly selling funds without ensuring the investor is aware of and understands all the fees and risks and alternative investments they should be aware of!

In short we are going to be the worst nightmare for the IIROC and every other SRO who has let the investor down!

Okay, maybe I am looking for more than any foundation sponsored by the industry can offer. My point is that no group who accepts funds from an industry SRO can truly reflect the average investor.

We need an Eliot Spitzer (the lawyer not the politician) who can hold large dollar penalties over the heads of these firms. Money talks and no investment firm is going to voluntarily give up easy money just to do what is right!


MY POINT: The situation is a crisis for small investors and a bump in the profit trail for major investment firms. Until the issues of the average investor can threaten the bonus of the big bosses NOTHING will EVER change!


Let me by very clear, F.A.I.R. are great people and I do not in any way doubt the integrity of the Directors of the Foundation. However, they set a dangerous precedent because they are toothless watchdogs; but they give politicians and the investment firms the ability to point and say “the interests of small investors are being met” by this august body of advocates.


Simply put; the best intentions of the F.A.I.R. Foundation is no match for the fire power of the investment firms. In real life David gets pounded to a pulp by Goliath!

Reality sucks, eh!

Sois mike
Posted by sois mike at 1:01 PM
Labels: WHY I FEAR F.A.I.R.


http://faircanada.ca/en/






Dealer Representatives:

One of the few points of clarity for investors in this bizarre regulatory mess was the fact that market registrants – securities salespeople – were licensed as “salespeople”. The primary focus of regulators should be to add clarity to the security industry. Instead our regulatory folks thought this would be a good time to blur titles so that investors have no idea whether they are dealing with a sales person striving for a fee or commission, or a fiduciary advisor focused on investor needs.

n In Canada, now you will deal with a “dealer representative”, which is Latin for “huh?”

Apparently the solution to the concern about selling securities nobody can understand is to create titles that nobody can understand! Clear only to IIROC and the MFDA, we can presume !!

[admin]

one more person is starting to speak out on behalf of the truth and of the public interest

Bravo for an honest man

[admin]

Re: Social media to reboot financial advice

Q. When does the media itself – when do the writers and editors + the owners of Adviser.ca – individually and collectively as a medium become guilty of facilitating, perpetuating and committing Criminal Misrepresentation of market registrants as “advisers” v. their being licensed by our 13 provincial / territorial securities commissions as “salespersons”?

Please note the excellent 5+ years old “grist” on this subject on Larry Elford’s blog – this “advisers” v. “salespersons” misrepresentation issue is not brand new – Glorianne Stromberg covered this issue in her July 21, 2005, What “professional advisor” means IE article

-- note how Glorianne identified and directly addressed the lack of “professional” – the egregious hypocrisy when university educated and degree bestowed professionals – OSC lawyers plus the President of the OSC’s 100% funded Investor Education Fund – are themselves knowingly facilitating and perpetuating the Criminal Misrepresentation of “advisers” v. “salespersons” !!

EVIDENCE: The problem of Criminal Misrepresentation is BIGGER than BIG especially when Tom Hamsa, [ an Ivey MBA graduate !!] as President of the OSC’s 100% funded Investor Education Fund is himself guilty of using the fiduciary suggesting and implying title of “adviser” instead of using the full, true, plain and legal disclosure verbiage of a market registrant licensed by the OSC as a “salesperson”

EVIDENCE: especially when the Government of Ontario is committed to fighting Elder Financial Abuse

-- “salesperson” verbiage that the OSC arbitrarily and unilaterally changed last July 17, 2009 – verbiage that the OSC actually dumbed down, made foggier to “dealer representative”

-- a huge premeditated Breach of trust by public officers by an Ontario Crown Corporation – premeditated Breach of Trust by Public / Civil Servant Officers at the Ontario Securities Commission and its 12 other Canadian Securities Association (CSA) member securities commissions

-- A huge Breach Of Trust by Public / Civil Servant Officers that not only breached Section 122 of our Criminal Code

-- BUT that should now be debated in our GOC Parliament and require either an adjudication decision from our GOC Competition Bureau and / or an Act from our GOC Parliament to ban the egregious Criminal Misrepresentation abuses that “adviser” portrays !!

opinion of Joe killoran
he uses a lot more big words than he needs, but in my view, if you can sort through the communication issues, you might just find that Joe tells it like it really is........he just might be ten years ahead of the rest of us in his thinking

[admin]

A good read: Paul Sullivan in NYT’s ―Broker? Adviser? And what’s the difference?‖ discusses
―who is better able to look out for your money, a broker or an independent adviser?‖ While you
no doubt have read about this here and elsewhere, it is worth repeating since ―business practices
and regulatory guidelines that are rarely understood by the client and often blurred in practice.
Brokers are governed by the ―suitability rule,‖ which requires them to have ―reasonable grounds
for believing that the recommendation is suitable,‖ according to the Financial Industry
Regulatory Authority. Registered financial advisers are supposed to adhere to a higher standard
— ―fiduciary responsibility,‖ an ethical and legal requirement that the investor’s best interest
comes first, not the adviser’s own financial gain.‖ The article is interesting because it explains
that the distinctions are not always black and white, and concludes that ―the one looking out for
your interest may have to be you.‖ (You might also want to re-read Bernstein's ―Muggers and
worse‖ chapter in ―The Investor’s Manifesto: Preparing for Prosperity, Armageddon, and Everything in
Between‖) Source: RetirementAction.com

http://www.nytimes.com/2010/02/18/your- ... ssspecial3

http://retirementaction.com/BernsteinManifesto.aspx

[admin]

The industry (and the paid lawyer lobby) does NOT want the public to be informed nor protected, thanks for letting us continue to loot you...............


Imposing a fiduciary duty on advisors would increase complexity, not protection

Legal panel discusses the regulatory impacts of a fiduciary standard on financial advisors

Thursday, March 25, 2010

By Megan Harman

Imposing a fiduciary standard on financial advisors wouldn’t necessarily lead to greater investor protection or stronger enforcement practices in Canada, legal experts said on Thursday.

At a Toronto conference that explored the advisor-client relationship, hosted by FAIR Canada and the Hennick Centre for Business and Law, a panel of lawyers discussed the regulatory impacts of a fiduciary standard on financial advisors.

Kelly McKinnon, a partner at Gowling Lafleur Henderson LLP said imposing a fiduciary duty does not add a lot of substantive protection, and will not necessarily make the jobs of regulators and enforcers easier. She argued that the current standards are sufficient.

“The current standard that applies to all advisors -- to act fairly, honestly and in good faith in respect to their clients’ interests -- captures in many resects, I think, the same thing that we want to get at in a potential breach of fiduciary duty,” said McKinnon.

“Fundamentally, the tools from an enforcement perspective are there to catch the kinds of misconduct we’re talking about.”

Furthermore, she explained that the concept of fiduciary duty is not well understood or consistently applied. The ambiguity around it makes it relatively easy for offenders to argue that the standard does not apply in all situations, McKinnon said, and so breaches of the duty are challenging to prove.

“In many respects, I think it has the potential to broaden the scope of defenses,” she said. At a minimum, imposing a fiduciary duty on financial advisors would make things more complex as industry members and regulators define the standard and determine how it applies.

Joseph Groia, principal at Groia & Company, agreed that imposing a fiduciary duty on financial advisors would not produce the desired results. He pointed out that the assumption underlying fiduciary relationships is that the client is vulnerable and uneducated, which is not true in all cases.

“What we want to do, rather than creating a remedy based on that assumption, is we want to work on disproving that it’s the fundamental nature of the relationship,” Groia said.

He called on the industry to focus on reducing the proportion of clients who are so vulnerable by improving investor education.

Laura Paglia, a partner at Torys LLP, pointed out that in theory, imposing a fiduciary standard could lead to higher damages for victims, since they would be entitled to restitution. But cases in recent years show that victims in Canada already receive this level of damages despite the lack of a fiduciary standard.

“They were otherwise restituted without needing to go to a fiduciary standard,” she said.

Edward Waitzer, partner at Stikeman Elliott LLP and director of the Hennick Centre for Business and Law, argued that a fiduciary standard is about guiding conduct. Such a standard could effectively reduce the number of disputes that need to be resolved, he said.

Waitzer called the Canadian enforcement system “ineffective,” and suggested that a fiduciary standard could be a step in the right direction.

“Having some sound principles to underlie the relationship might be a good starting point,” he said.

IE

[admin]

Let’s get the ethics clear here

Can you imagine that we are actually having this debate?


GLOBE AND MAIL

Adviser or sales agent?


Rob Carrick

Published on Thursday, Apr. 01, 2010 12:00AM EDT Last updated on Friday, Apr. 02, 2010 2:24AM EDT

Can you believe this? There's actually a debate going on about whether financial advisers should be explicitly required to put the interest of clients first.

Gee, tough one.

Should we have a financial advice industry that's based on selling products and where the guiding principle for clients is caveat emptor?

Or should we make financial advisers a true profession with a fiduciary standard?

Fiduciary is a legal term that comes from the Latin word fiducia, which means trust. Encyclopedia Britannica defines a fiduciary as "a person who occupies a position of such power and confidence with regard to the property of another that the law requires him to act solely in the interest of the person whom he represents."

“ Too many advisers are mutual fund salespeople who work similarly to sellers of cars and furniture. ”

In my years writing this column, I have met hundreds of diligent advisers who already meet a fiduciary standard. They build personalized financial plans for their clients and they choose the best investment products to realize these goals, regardless of how much they pay the seller in fees and commissions.

The problem with the advice business is that this not a universal standard. Too many advisers are mutual fund salespeople who work similarly to sellers of cars and furniture. You know the story - you walk in to make a purchase and you end up in negotiations with someone whose goal it is to make money off you. It's understood and it's fine because everyone knows the rules.

Things are different in the financial world. Here, we have "advisers" who may advise, or they may actually do nothing but sell stuff. A fiduciary standard would clarify things. People who want to call themselves advisers would be fiduciaries and those that don't would be mutual fund salespeople.

Clients who wanted overall financial planning would see an adviser. Those who wanted to buy some investments would sit down with a salesperson and do all the requisite haggling about commissions (picture it: your salesperson going to "ask his manager" if he can sell you a mutual fund with no upfront commission).

The idea of dividing the financial world into advisers and salespeople comes from Cary List, president and CEO of the Financial Planning Standards Council, which administers the Certified Financial Planner (CFP) designation in Canada.

Mr. List participated in a conference last week on fiduciary duty for advisers that was staged by the Canadian Foundation for Advancement of Investor Rights (FAIR) and York University's Hennick Centre for Business Law. His take on the views presented was that there's no agreement about what fiduciary duty truly means in a legal sense. As a result, he thinks the right approach is to require a fiduciary duty of advisers in all but name.

Call it a duty of care, for example. Then describe the people who agree to assume that duty as advisers, and the rest as salespeople.

"The average Joe can understand the difference between a salesperson and an adviser," Mr. List said.

There are a number of arguments against requiring advisers to be fiduciaries, or something equivalent. Some say current standards are adequate to protect investors, while others say a better approach is to educate people to make them smarter consumers of financial products and advice.

But you can't help but feel that opposition to fiduciary-like rules is about keeping the status quo in the financial industry. Better to keep allowing all those mutual fund salespeople to pretend they're advisers so people will trust them more and buy lots of products. Better not to introduce ethical standards that will expose ethical deficiencies and give wronged investors more juice to pursue restitution.

Investors need all the juice they can get because the current system is not doing the job of protecting them. Don't be distracted by outliers like Robert Mander or Earl Jones, phony advisers who betrayed their clients.

The much bigger problem is low-key but more frequent abuses like overrisky portfolios and the hawking of junk products that pay fat fees.

In the aftermath of the global financial crisis, there are signs the investment industry is striving to bring more of an advice component to its relationship with clients. If it's all about selling investing products, then a year like 2008 can be deadly for business.

But with advice comes responsibility. Either the investment industry accepts it and adopts the fiduciary-like standards that define a serious profession, or it keeps a status quo where selling is the main objective.

Let's close on an optimistic note. Mr. List is in favour of applying fiduciary-like standards to the industry, and he represents the largest advisory designation in the country with 17,500 advisers. As he puts it, why not adopt higher ethical standards? "What is the danger - that people will understand what the duty of care is? How is that a bad thing?"

[admin]

Why should you read this article on investment self defense?

Because it contains “insider” information that could cause your retirement to be worth double when you go to spend it.

That is ridiculous you say, what are you selling?

Nothing. I quit selling investments in 2004 after learning how corrupt and self serving the industry has become. Below I give just one simple example that could double your retirement.

First, did you know that an investment return that is shaved (reduced) by just 2% will cut your future savings in half, over a 35 year period.

Second, would you consider that your investment “advisor” might be the largest single impediment to your getting the total return that you deserve? To not being shaved by 2% or more?

Are you aware that your investment “Advisor” is not in fact licensed as an “advisor”. Up to Sept 26, 2009 your investment “advisor was licensed trained and paid in the category of a “salesperson”. Yes, legally licensed as a salesperson.

Never heard that one before? I guess you have never had an investment salesman introduce themselves to you as a “salesperson”. Why?

Clients act less suspicious or doubtful of investment recommendations if they feel they are coming from a professional and not a seller of products like cars or furniture. So that is what they call themselves. Despite laws against misrepresentation. Those laws are not enforced. Despite Competition Act laws against misinforming the public. The Competition Bureau of Canada does not enforce those rules for the investment industry.

Securities Commission rules state that each registrant “must” correctly identify their license and registration category to the customer. They do not enforce that particular rule, or for that manner, most of the thousands of rules designed to protect the public. After all, each commission is fully paid by the investment industry. Such a shame to let a crown agency get away with this negligence and breach the public trust in this way.

I got sidetracked, where was I? So your investment person is lying, and misleading him or herself when they tell you they are an “advisor” a name and title which conveys an entirely different level of honesty, duty of care, and ethics to look after the customer interests first. After Sept 29, 2009, the entire regulatory industry (paid 100% by the investment industry) struck the word “salesperson” from the Securities Acts across Canada and replaced and renamed them as “dealing representatives”. Clearer?

Because our investment industry is totally “self” policing, we can decide which rules we wish to enforce and which we choose to ignore. We simply choose to ignore those which are not in our favor. Sue me if you think I am lying and I will bring forth my proof.

The misrepresentation, allows the industry to mislead millions of Canadians into a false sense of trust and vulnerability. This trust and vulnerability then gets violated about 80% of the time, as commission salespeople and investment firms try to make monthly commission targets.

They place you in self serving investments (like a salesperson would) while ignoring rules which prohibit such practices.

Those investments (highest commission mutual funds, “house” brand mutuals, trust units, various dubious products that come down the road every year that pay them high fees., etc) tend to “bump up” annual fees and commission by 2% or more. The suckers who buy them earn about 2% less without even knowing their pocket has been picked.

Repeat this for 35 years, and the million dollars you had hoped to retire with will be worth less than half you had planned for. Your trusted investment salespeople will own the other half.

More tricks of the investment trade found free of charge at www.investoradvocates.ca

Larry Elford (former CFP, CIM, FCSI, Associate Portfolio Manager, retired) worked twenty years inside bank owned brokerage firms in the country and retired in 2004, after failing at convincing his industry to clean up its sales tricks. He writes, blogs and has completed a one man doc film project on what he learned as a broker at www.breachoftrust.ca

His public education work is completely free of any sale pitch, any product, or any cost. He speaks to community groups free of charge to warn and educate people about investment tricks of the trade. Feel free to publish, duplicate or distribute this article as it is without copyright protection. He can be reached at lelford@shaw.ca

[admin]

IMAGINE
Larry Elford

Imagine yourself working in an industry where you can call yourself a trained professional after a 30 or 90 day correspondence course. I did.

Imagine making a quarter million dollars per year with less professional training than a hairdresser or a plumber. I did.

Imagine working in an industry where forgery, fraud, negligence, negligent misrepresentation are not handed over to the police, but rather "handled" internally by persons hired and paid by your very industry.

To use but one example, and perhaps the “foundation” for each and every financial crime up the ladder to the top of Wall Street, imagine being licensed as a “salesperson”, and being able to get away with calling yourself a professional advisor. Others go to jail for misrepresenting a professional title. Doctors, Dentists, Engineers, Lawyers. We have done it for more than twenty years. How, you ask?

Imagine that your industry has not one national, regional or local agency that is charged with sole protection of the public interest, or one which is not paid by your very own industry. Mine didn’t.

Imagine having such a “license” to print money, and a license to get away with nearly anything, including criminal violations,.........oh, I almost forgot one small item.

Imagine being able to skirt the law in your securities sales just by filling out a form for something called an “exemption”. You can now sell products which do not even meet our laws. Imagine.

Thousands of legal exemptions have been granted to push corrupt investment advice or products, and imagine that these have all been done with no notice to the public consumers whose money is involved. Can you go to the police and ask them for permission to violate the laws? Imagine that the investment industry can.

Imagine when some of those products explode, implode, or dissapear, like we have seen in our recent economic collapse. Imagine having those very same “regulators” hand out fines equalling less than half of one penny for each dollar that dissapeared. Imagine that things like this happen when the crime is the largest in Candian history and involves billions and billions and billions of Canadians money. Amazing.

Now imagine that your self regulatory “schtick” is so well spun, so carefully woven, that our own little personal regulators have even gained access to something called the “joint management committee” of the RCMP Integrated Market Enforcement Team. Thats right kids, I would like you to imagine that our best people are on the inside at the RCMP. “Helping” them investigate our best people.

Now take away the word “imagine” from this article and you are introduced to the naked greed and self interested design of our Canadian investment regulatory system.

You are not protected in Canada. You are the very bottom of an economic food chain that is designed to feed those above you. Imagine you are like a cow, out in the field, not even aware of your particular relationship in the chain. Contented. Imagine.

More tricks of the investment trade found free of charge at www.investoradvocates.ca

Larry Elford (former CFP, CIM, FCSI, Associate Portfolio Manager, retired) worked twenty years inside bank owned brokerage firms in the country and retired in 2004, after failing at convincing his industry to clean up its sales tricks. He writes, blogs and has completed a one man doc film project on what he learned as a broker at www.breachoftrust.ca

His public education work is completely free of any sale pitch, any product, or any cost. He speaks to community groups free of charge to warn and educate people about investment tricks of the trade. Feel free to publish, duplicate or distribute this article as it is without copyright protection. He can be reached at lelford@shaw.ca

[admin]

INVESTMENT TRICKS OF THE TRADE
Larry Elford

Over 90% of investors do not know whether they are dealing with a salesperson, or a trusted professional advisor.

Why would this be important? Because the difference in treatment, in product recommendations tends to cut your retirement by half over a long term investment horizon. While putting the other half in the pocket of your so called “advisor”.

Investment firms in canada say (in court) that they do not owe a fiduciary duty to customers unless the customer signs over full authority on the account the the firm?
That is a bit of a contradiction to what their advertising promises suggest, but then who plays word games and legal games better than a large financial company when asked to give you a return of your own money if it becomes lost by abusive practices?

Part of the confusion results from intensive advertising campaigns by the financial industry to try and persuade investors that brokers are not salespersons but rather trusted advisors. Nothing could be further from the truth.

One of the great tricks of the investment trade is that while 130,000 registered persons in Canada were licensed in the capacity of “salesperson”, they did not like to use this particular name. They preferred to inflate their title up a notch or two, beyond simple sales, to something less accurate like “advisor”. There was more trust generated if customers believe you are an “advisor” than if you honestly inform them of your sales license. Perhaps that is why in September of this past year, 2009, all references to “salesperson” were stricken from the securities act in 13 provinces and territories. These people’s license with each provincial securities commission now say that they are licensed as “dealing representatives”. You tell me if you can figure out what that means to your money. Do they owe you a duty of care, or are you going to be preyed upon? Again.

Transparency is covered by an industry that makes billions based on trickery, on word games. When push comes to shove and an abused customer goes to court to say that the “advisor” owed you an honest duty of care, perhaps a fiduciary duty, you should see how quickly they back away from their advertising promises. Abused investment customers thus get abused twice here in Canada. Once by misrepresentation by their salesperson/firm, and a second time when the courts beat them with legal tricks and word games.

Customers have very right to know what exactly they are dealing with. Whether or not they should trust this industry, or if they are in a “buyer beware” predatory sales relationship. Unfortunately, almost anyone within the industry, is getting a salary from the industry, and thus cannot seem to remember where they left their ethical manners. That includes each and every regulatory body in Canada. 100% are paid salaries from the industry

The industry thus gets to have it both ways. They get to behave in a predatory sales manner.......for example mutual fund sales statistics from the industry say that four out of five investment sellers will recommend the highest cost, highest commission type of investment when faced with a choice between otherwise equal investment types.

The trick is, that because we are a self regulating industry, misrepresentation, misleading advertising, title inflation, and deception like this are all handled internally. Or rather, not handled at all. The Competition Bureau of Canada is well aware and will not touch the matter. The police are also aware and have their hands full.

The net result is that your investment returns here in Canada, will average about 2% less over time because of the self serving nature of a self regulating industry. This is born out by various global university studies. That 2% will cut your future retirement saving value by half, over a 35 year period.

This trick is just another way that the financial services industry in Canada makes financial crime pay. For themselves. What should you do?

As one writer put it recently, treat every investment seller you meet in Canada as you would treat a hardened criminal, and you will probably manage to protect yourself from some of the predatory sales games.

More tricks of the investment trade found free of charge at www.investoradvocates.ca

Larry Elford (former CFP, CIM, FCSI, Associate Portfolio Manager, retired) worked twenty years inside bank owned brokerage firms in the country and retired in 2004, after failing at convincing his industry to clean up its sales tricks. He writes, blogs and has completed a one man doc film project on what he learned as a broker at www.breachoftrust.ca

His public education work is completely free of any sale pitch, any product, or any cost. He speaks to community groups free of charge to warn and educate people about investment tricks of the trade. Feel free to publish, duplicate or distribute this article as it is without copyright protection. He can be reached at lelford@shaw.ca