# Its long but I suggest reading my story



## sagsal (Apr 7, 2009)

About ten years ago I grew very frustrated with my inability to grasp financial markets, the best approach of how and where to invest our money and understanding the relationship of investing to paying down debt. Now it all seems somewhat simple – pay down debt and then get ready for retirement, or somewhere in between.

As my frustration grew I channelled it towards finding some professional help. I met with some bank reps and found them to be lacking, especially since when I looked up the mutual funds proposed to me on Morningstar they were all 3 stars or below!

I found two names of advisors who touted themselves as whole of approach – meaning they were not going to just sell me and my wife stock for the sake of selling, but truly review our situation and help us make the best choices – even it meant forgoing higher fees in the beginning.

After back and forth with the two different advisors I chose one and felt really good about the decision. He and his colleague came to our house, spent hours meeting with us to understand our situation and help us make some decisions. Over the next few years we were encouraged to contribute to our RRSPs and purchase universal life insurance. As we had more children when asked if I should buy more insurance I was encouraged to do so. In fact we were also encouraged to take out life insurance policies on our children and pay more than the premium to invest.

A few years later we moved to a new and bigger more expensive house. The first sign I started to second guess the advice I was receiving was when I suggested to him I take out a variable mortgage as the recession started to hit – though hindsight is 20/20 – I should have gone with my gut instead of going with a fixed 4.85% mortgage through his broker.

Then as our monthly expenses increased, which we could cover, I suggested to his life insurance salesman that perhaps I had too much insurance and especially since I was paying $300 a month for universal and another $165 for a term 20, just for me, that I needed to free up some cash. Also I specifically asked about the cash surrender value – which had not been properly explained to me – and though asked on numerous occasions could I take out the money from my son’s life insurance policy and was reassured yes, I was never told yes but after 10 years. My fault for not being more diligent – but I was supposed to be able to trust him.

Soon after these conversations it started to become clear to me that they were not trusted advisors but pretty much about my fees:

1.	I never got any advice on stock picking. I would make suggestions and they would either agree or not, the trade would be made, and nothing else.
2.	Both my wife and I are career civil servants and though we have DB pensions, we were encouraged regularly to either use extra cash or borrow to make RRSP payments.
3.	Never were we told to forgo RRSP payments and concentrate on the mortgage – even when I questioned. I paid 2% annually for them to “manage” our money.
4.	For our insurance, they felt that $3m in life insurance was enough for me and perhaps I would need more when our third child came. Even though my wife works full time and makes equivalent to half our household income.

I finally went to an independent financial advisor, who neither sells any products nor earns any commissions, and received solid, good advice: reduce the amount of life insurance we have, concentrate on the mortgage, why put into RRSPs since they will be taxed at the highest rate. All this cost me $400 in his time and has already saved me thousands annually, provided me with a clear financial path and woke me up the realities of the “wealth” management industry.

As for my former friend the advisor, he still thinks he is a trusted advisor that can be counted on.


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## MoneyGal (Apr 24, 2009)

Here is one tip I have learned from many years in and around the financial services business. And I know people here will absolutely disagree with me: 

Don't use an advisor who offers to come to your house. 

It's a classic sales technique. But when the advisor is in your house, you have surrendered a psychological advantage to the advisor. He or she is already "in the door" and now you are treating them like a guest in your home, and this is no longer a purely professional relationship, but one in which you are going to defer - even ever so slightly - to the advisor. Now this is a cordial, "social" relationship, and you are all going to get along and be pleasant to one another. 

Except you don't know that the wolf is not just at your door, but in your house, and along with that beautiful fur comes a sharp set of claws and fangs.


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## andrewf (Mar 1, 2010)

I've heard enough horror stories to know that this is not isolated bad apples, but something about the way this business is structured. The whole asset management and investment industry is rife with conflicts of interest. I'm sure there are some honest, decent people working in the industry, but it sounds like another area where nice guys finish last. Keeping up with your peers means screwing over your clients.


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## Causalien (Apr 4, 2009)

So how do we set up a new industry up with good advisors?

It took the op several tries to find one and word of mouth doesn't really help. Since people with lesser financial knowledge won't know they are being ripped off, but is part of the recommendation process.

No matter how I see it, finding good advisors depends on word of mouth and that is a flaw.


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## marina628 (Dec 14, 2010)

I also keep my insurance and my investments with separate companies.Not sure it has saved me any money over the years but I feel my insurance costs are very good and been with same place for 26 years.Bad financial advisors is why I looked for a forum like this


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## Square Root (Jan 30, 2010)

A lesson well learned. I have never used an advisor but if I ever did it would be one that charged for his time. i would never invite him into our home as per MG's advice.


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## leoc2 (Dec 28, 2010)

Causalien said:


> So how do we set up a new industry up with good advisors?
> 
> It took the op several tries to find one and word of mouth doesn't really help. Since people with lesser financial knowledge won't know they are being ripped off, but is part of the recommendation process.
> 
> No matter how I see it, finding good advisors depends on word of mouth and that is a flaw.


How about creating a website like this one:
http://www.ratemyprofessors.com/


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## ddkay (Nov 20, 2010)

It's a sales industry, so one FA will have a lot of financial incentive to protect their name (the richest will pay for spectacular fake reviews), and their competition will work the opposite way. It's difficult to verify anything on the net...

Sometimes it helps to search their names on a database like the CFA member directory. Most people claiming to have a CFA, actually don't...


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## CanadianCapitalist (Mar 31, 2009)

Thanks for sharing your story. Unfortunately, from what I hear from friends and even insiders in the industry, stories like yours are very common. It beats me why even investors with significant $$$s stick with retail fund advisors who simply sell some mutual funds, instead of hiring a competent advisor. 2% of several hundred thousands should buy lot of god advice.


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## steve41 (Apr 18, 2009)

You won't hear much about this in the Canadian press, but both the UK and Australia have completely turned the FA industry on its ear. A financial planner/adivsor can no longer be compensated for selling product. No MERs, no trailer fees... the only way they can earn money is to charge for advice.... fee for service. Can Canada be far behind?


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## Causalien (Apr 4, 2009)

leoc2 said:


> How about creating a website like this one:
> http://www.ratemyprofessors.com/


Yeah, I thought about this. But you get upvoted usually for good service. Not really good advice. Take the professor who decided not to punish plagiarism for example. His rating was down during the period of crackdown, but up once he stopped because students likes that better.

Then there's the phenomena of social connection whereby popular advisors asks his network to upvote him. So it became a popularity contest. I remembered a sponsor of Garth's talk once. Awkward and completely bad with public speaking. He was advocating overweight gold during one of his speech from his analysis and he was right. But did the audience think he was giving good advice? No. We judged him based on his charm.

Anyway, just ranting. Once I get the formula figured out, I'll build the website. For now, it's still being weighed in my mind. 

Out of curiosity, would it help if I just release a copy of ratemyprofessor for financial?


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## Eclectic12 (Oct 20, 2010)

steve41 said:


> You won't hear much about this in the Canadian press, but both the UK and Australia have completely turned the FA industry on its ear. A financial planner/adivsor can no longer be compensated for selling product. No MERs, no trailer fees... the only way they can earn money is to charge for advice.... fee for service. Can Canada be far behind?


Surely you jest ... nice, quiet, complacent Canadians demanding these changes?

Canada has some of the highest MERs around yet only small segments of the population know or seem to care.


Cheers


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## sagsal (Apr 7, 2009)

*Great responses*

Thanks to all for the great responses

So when are the Financial Post or Globe Business going to start running articles about how to be more careful about dealing with "Advisors" and encouraging people to do more on their own

The purpose of me writing this quick story was to make sure others don't make the same mistake - I wish the government would start to do something about this - too many "financial" people are making too much money off the average joe


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## kcowan (Jul 1, 2010)

steve41 said:


> No MERs, no trailer fees... the only way they can earn money is to charge for advice.... fee for service. Can Canada be far behind?


I think so. The insurance lobby is very strong in Ottawa, and the banks will be against it.


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## kcowan (Jul 1, 2010)

sagsal said:


> The purpose of me writing this quick story was to make sure others don't make the same mistake - I wish the government would start to do something about this - too many "financial" people are making too much money off the average joe


I think stories like yours will help but only for the people looking for them. People that come here already have started to get religion. 

All of our friends have MER-based financial advisors and do not want to change. They view me as a bit of an oddball, kind of like people that change their own oil in their cars. A few have asked whether I would handle their portfolios. I have replied that I can't do that. They assume that I am promoting something! I am but not for personal benefit...


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## Square Root (Jan 30, 2010)

i think not paying for sales type advisors is a lot smarter than changing your own oil.


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## Causalien (Apr 4, 2009)

Square Root said:


> i think not paying for sales type advisors is a lot smarter than changing your own oil.


I've been reading Zen and the art of motorcycle maintenance. I think the divided between you and me is that of John and the Author.


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