# Bank "Financial Advisor discouraging me from buying etfs



## kyboch (Dec 23, 2011)

I saw my "financial planner" today. She kinda freaked out when I told her my plan to sell my MF and invest in index ETFs. She then sent me an email trying to "scare" me into staying with the MF. Most of her points were pretty silly but here's one I don't know about. This was listed as one of the reasons not to buy ETFs

1. Generally purchased in board lots of 100

What does that mean? Can I only buy an ETF in lots of 100, or is that a minimum purchase of 100 lots?

Thanks for the help


----------



## CanadianCapitalist (Mar 31, 2009)

Nonsense. What she is saying is that you can only buy ETFs in units of 100. (typically 100 shares = 1 board lot). I've never had a problem buying on odd lot of say 25 shares.

Of course, she will be freaking out. You are essentially saying you'll be firing her. 

PS: Can you share the email you received from her? (after removing all personal information).


----------



## lewin (Jan 10, 2011)

You can buy ETF's in whatever number of shares you like, though it's true that you can't buy fractional shares. I have a small account and rarely buy in lots of 100.


....whether you buy ETF's or mutual funds is probably a matter of account size, but any advisor who speaks disparagingly of index funds should be treated with some skepticism. Did you ask about index mutual funds?


----------



## jcgd (Oct 30, 2011)

Haha, mine did the same thing. He was totally flabberghasted. End the end though he was supposed to represent me and he agreed with my logic.

I've bought as little as 3 shares. ETFs are traded as shares so as long as there is a buyer/seller for the number of shares you're buying/selling you're golden. I could only see a problem if you tried to unload quickly in a crashing market.


----------



## financialnoob (Feb 26, 2011)

Are you talking about ETFs or Index funds? I think your advisor is thinking about ETFs.

Here's a breakdown on the differences in terms of pricing between the two. As a general rule of thumb, I've seen $40-$50K as the figure before ETFs start being more cost-effective than index funds.

http://canadiancouchpotato.com/2010/06/25/should-you-use-index-funds-or-etfs/


----------



## jcgd (Oct 30, 2011)

kyboch said:


> I saw my "financial planner" today. She kinda freaked out when I told her my plan to sell my MF and invest in index *ETFs.* She then sent me an email trying to "scare" me into staying with the MF. Most of her points were pretty silly but here's one I don't know about. This was listed as one of the reasons not to buy *ETFs*





financialnoob said:


> Are you talking about ETFs or Index funds? I think your advisor is thinking about ETFs.


Noob, I think you mis-read.


----------



## avrex (Nov 14, 2010)

CanadianCapitalist said:


> PS: Can you share the email you received from her? (after removing all personal information).


I agree. I think you should post this email for the following two reasons.

1. As a public service, to educate all of us DIY and future DIY investors, on the false information being spread by those in the financial sector who are trying to take a chunk of our hard earned money.
2. Entertainment. I could use a good laugh.


----------



## kyboch (Dec 23, 2011)

CanadianCapitalist said:


> Nonsense. What she is saying is that you can only buy ETFs in units of 100. (typically 100 shares = 1 board lot). I've never had a problem buying on odd lot of say 25 shares.
> 
> Of course, she will be freaking out. You are essentially saying you'll be firing her.
> 
> PS: Can you share the email you received from her? (after removing all personal information).


Hey CC here you go.

Here are all the points she brought up:

Additional costs 

commission fees to buy and to sell 
fees for fee-based brokers
Dividends are not automatically re-invested – additional commission fee
RIPs and SWPs – commission fees for each one
Generally purchased in board lots of 100
Liquidity – some smaller ETFs may have liquidity issues
Performance – cannot become defensive in market downturns
Index overweights – cannot re-balance
Supply and demand – could cause price to deviate substantially from intrinsic value

That last one I don't get either. Is she referring to volume issues?

And finally:
I spoke with _____ this afternoon as well as our Asset Specialist through ____ Asset Management, and they both agreed that there is a longer time horizon needed when investing in an index, either directly or through an ETF.

What??


----------



## jcgd (Oct 30, 2011)

commission fees to buy and to sell *MER*
fees for fee-based brokers *MER*
Dividends are not automatically re-invested – additional commission fee *MER*
RIPs and SWPs – commission fees for each one *MER*
Generally purchased in board lots of 100 *BS*
Liquidity – some smaller ETFs may have liquidity issues *May be valid*
Performance – cannot become defensive in market downturns *Market Timing?*
Index overweights – cannot re-balance *Depends on trading fees vs MER*
Supply and demand – could cause price to deviate substantially from intrinsic value *This I could see but not sure*

It seems like most of her argument is based off costs, as if the mutual funds have no MERs.


----------



## Causalien (Apr 4, 2009)

Supply and demand – could cause price to deviate substantially from intrinsic value. *THIS IS TRUE* and is the #1 research you need to do on your ETF before you buy and just like any mutual fund. When the herd all withdraw at the same time, the price of the fund fall, even though the underlying asset might be above its unit price.

#2 is whether or not shares short (Creation units) is more than the total shares issued.

There will be a problem in the future on some ETF I am pretty sure due to the amount of shares short being bigger than actual amount of shares issues. However, we have not reached that event horizon yet.


----------



## financialnoob (Feb 26, 2011)

jcgd: Probably. I'm a bit out of it tonight.

But the terminology "index ETF" confused me. I've always seen it referred to as index fund or ETF, and in recent conversations, found some people use ETF when they mean index fund.

It could very well be me though.


----------



## Dibs (May 26, 2011)

kyboch said:


> Hey CC here you go.
> 
> Supply and demand – could cause price to deviate substantially from intrinsic value


Most, if not all, ETFs have a process which protects against this kind of deviation. Essentially you are able to amass a large amount of shares and redeem them for the underlying securities. This would prevent the ETF from dropping too far below the intrinsic value. 

The opposite can also occur, i.e. an authorized person can deliver a basket of stocks representing the index to create new ETF units. This would create more "supply" of the units, preventing the ETF from rising above the intrinsic value.

Ref: http://us.ishares.com/understand_etf/fundamental/etf_creation_redemption.htm


----------



## jcgd (Oct 30, 2011)

financialnoob said:


> jcgd: Probably. I'm a bit out of it tonight.
> 
> But the terminology "index ETF" confused me. I've always seen it referred to as index fund or ETF, and in recent conversations, found some people use ETF when they mean index fund.
> 
> It could very well be me though.


Ahh, I see. Good point.



Causalien said:


> Supply and demand – could cause price to deviate substantially from intrinsic value. *THIS IS TRUE* and is the #1 research you need to do on your ETF before you buy and just like any mutual fund. When the herd all withdraw at the same time, the price of the fund fall, even though the underlying asset might be above its unit price.
> 
> #2 is whether or not shares short (Creation units) is more than the total shares issued.
> 
> There will be a problem in the future on some ETF I am pretty sure due to the amount of shares short being bigger than actual amount of shares issues. However, we have not reached that event horizon yet.





Dibs said:


> Most, if not all, ETFs have a process which protects against this kind of deviation. Essentially you are able to amass a large amount of shares and redeem them for the underlying securities. This would prevent the ETF from dropping too far below the intrinsic value.
> 
> The opposite can also occur, i.e. an authorized person can deliver a basket of stocks representing the index to create new ETF units. This would create more "supply" of the units, preventing the ETF from rising above the intrinsic value.
> 
> Ref: http://us.ishares.com/understand_etf/fundamental/etf_creation_redemption.htm


So would Dibs be more correct here? Should we worry about this issue or no? (I did read the link)


----------



## Causalien (Apr 4, 2009)

I worry, because I'd like to be prepared.


----------



## kyboch (Dec 23, 2011)

I think this explains it very well:
Complete article here

The Role of Arbitrage
Critics of ETFs often cite the potential for ETFs to trade at a share price that is not aligned with the value of the underlying securities. To help us understand this concern, a simple representative example best tells the story.

Assume an ETF is made up of only two underlying securities:

Security A, which is worth $1 per share
Security B, which is also worth $1 per share

In this example, most investors would expect one share of the ETF to trade at $2 per share (the equivalent worth of Security A and Security B). While this is a reasonable expectation, it is not always the case. It is possible for the ETF to trade at $2.02 per share or $1.98 per share or some other value.

If the ETF is trading at $2.02, investors buying shares of the ETF are paying more for the shares than the underlying securities are worth. This would seem to be a dangerous scenario for the average investor, but in reality, it isn't a major problem because of arbitrage trading.

Here's how arbitrage sets the ETF back into equilibrium. The trading price of an ETF is established at the close of business each day, just like any other mutual fund. ETF sponsors also announce the value of the underlying shares on a daily basis. When the price of the ETF deviates from the value of the underlying shares, the arbitragers spring into action. If the underlying securities are trading at a lower price than the ETF shares, arbitragers buy the underlying securities, redeem them for creation units, and then sell the ETF shares on the open market for a profit. If underlying securities are trading at higher values than the ETF shares, arbitragers buy ETF shares on the open market, form creations units, redeem the creation units in order to get the underlying securities, and then sell the securities on the open market for a profit. The actions of the arbitrageurs set the supply and demand of the ETFs back into equilibrium to match the value of the underlying shares.

Because ETFs were used by institutional investors long before they were discovered by the investing public, active arbitrage among institutional investors has served to keep ETF shares trading at a range that is close to the value of the underlying securities.

Read more: http://www.investopedia.com/articles/mutualfund/05/062705.asp#ixzz1lIEXHyDc


----------



## Causalien (Apr 4, 2009)

Let's take this example by kyboch and explore where things can go wrong. Ignore hedge fund naked short selling, forcing an excessive amount of creation unit for now.

The underlying mechanism depends on the arbitrageurs. Arbitrageurs arbitrage when there's confidence that money can be made. This is necessary for all assets.

Let's get back to hedge funds. Here's the one scenario that I haven't been able to find a proper answer from.

Supposed hedge fund naked short ETF, forcing more creation unit than actual shares. Let's say there's 100 SPY shares actually created, but hedge funds have naked shorted 200. Friday, some leaked WSJ info about fraud at SPY ETF. Those who hold the naked shorted shares from hedges and those who hold the original 100 SPY share holders all want to redeem the underlying securities at the same time. What happens?

Disclaimer: I haven't touched any ETF due to the above mentioned scenario and the fact that I believe my own pickings are better (which means I am pretty new when it comes to ETF). I'd really like to change my mind and achieve a couch potato investing so I can get on with my life. So experts of ETF. Change my mind.


----------



## andrewf (Mar 1, 2010)

Sounds like she's trying to save her trip to Maui. 

Her last point is that ETFs can trade at prices different than the NAV (net asset value), whereas mutual funds are traded at NAV (at the end of the day). Generally this isn't a problem, but it is something to be aware of, especially if you are trading in and out of ETFs frequently. By 'substantially', I think she exaggerates. A bad case of divergence from NAV would be a couple percent. Closed end mutual funds routinely trade at discounts or premiums of 10, 20 or 30% of NAV. 

Most of the time ETFs have a tight bid ask spread close to the NAV. It is certainly the case if you stick with the large, vanilla index ETFs.

Most of her other points are bunk. All of her points are designed to create FUD (fear uncertainty and doubt) and scare you into continuing to pay her 1% of AUM.


----------



## larry81 (Nov 22, 2010)

> It is difficult to get a man to understand something when his job depends on not understanding it.


I heard the same things from my ex advisor: etf and index investing are evil, the only way to the riches is by purchasing 2.5% MER mutual funds from commissioned salesman.


----------



## fatcat (Nov 11, 2009)

kyboch said:


> Hey CC here you go.
> 
> Here are all the points she brought up:
> 
> ...



price and underlying value is a non-issue, it gets arbitraged out very quickly
you can't reinvest small units automatically like you can with MF, that is true
lots of less than 100 can be priced less competitively, that's true
some smaller etf's are less liquid, that's true 
there are fees to buy and sell, that's true
index and performance don't make sense because it is inherent in the etf product
an index and an etf are 2 different things ... etf's are based on indexes

these are actually valid points and would make sense if the OP is doing a lot of trading but if you are holding long term, they don't make sense

if you like MF's, switch to tdw and start buying their low-cost eseries .. those do make sense


----------



## Cal (Jun 17, 2009)

The price deviating from the intrinsic value doesn't even bother me one bit. As long as you buy one of the 20 largest etf's, they are so close to the value of their holdings, and so liquid...no worries.


----------



## CanadianCapitalist (Mar 31, 2009)

Causalien said:


> The underlying mechanism depends on the arbitrageurs. Arbitrageurs arbitrage when there's confidence that money can be made. This is necessary for all assets.


Arbitrageurs *will* take advantage of any opportunity to make a risk free profit. Why wouldn't they? If you find $10 bills strewn on the sidewalk wouldn't you pick it up?



> Let's get back to hedge funds. Here's the one scenario that I haven't been able to find a proper answer from.
> 
> Supposed hedge fund naked short ETF, forcing more creation unit than actual shares. Let's say there's 100 SPY shares actually created, but hedge funds have naked shorted 200. Friday, some leaked WSJ info about fraud at SPY ETF. Those who hold the naked shorted shares from hedges and those who hold the original 100 SPY share holders all want to redeem the underlying securities at the same time. What happens?
> 
> Disclaimer: I haven't touched any ETF due to the above mentioned scenario and the fact that I believe my own pickings are better (which means I am pretty new when it comes to ETF). I'd really like to change my mind and achieve a couch potato investing so I can get on with my life. So experts of ETF. Change my mind.


Do you have any reason to believe naked short selling is widespread in ETFs? There do exit ETFs (mostly covering niche products) that have a large proportion shorted but the reason for this is the fungible nature of ETFs. 

Look at the evidence. ETF premium/discount from NAVs are widely published. The only time I can recall when popular ETFs failed to track NAVs was during the flash crash of May 2010. Even during the financial crisis of 2008-09 ETFs managed to track NAVs extremely well.


----------



## jamesbe (May 8, 2010)

I wish they wouldn't hide the MERs so well. I'm struggling with the same, hard to figure out if one will be better or not. My Sunlife account is nice, the list the MER costs monthly! So I can decide what to do with the money.


----------



## Causalien (Apr 4, 2009)

If there's 10 dollars on the sidewalk. I'll look for a video camera first, then a police officer. Then check which country I am in before I pick it up.

I don't believe naked short selling is widespread in ETF. Some are safe, but I also know that some are heavily shorted and there are people who invest in them who do not know this fact.

I also know of ETF that has NAV that dosen't track at all for a long period of time. Take EGPT as an example. It's not that I am definitely against ETF. It's that these are things that people didn't believe could happen but happened. Just like money market funds broke the buck during 2008. ETF are touted as a safe way to invest in index. I would just like to bring people's attention to these problems so they don't have a veil over their eyes on what could possibly go wrong. 

For some reason, I manage to trade these etf that has these distorted problems and I can totally associate that to my own tendency to go for more risky assets. Comparing Mutual Funds to ETFs, ETF wins out. But comparing ETF to your own picking, the control you have of your own picks wins out, but that comes with the expense of time+money invested to know how to pick stocks.


----------



## Belguy (May 24, 2010)

I dumped my bank financial advisor many years ago and never looked back. This is the smartest thing that I have done in my investment career because it has ended up saving me thousands of dollars in fees over the years and allowed me to keep more of MY money rather than giving it to financial services salespersons.

Reference www.canadiancouchpotato.com and look at the model portfolios.

It's not rocket science.


----------



## HaroldCrump (Jun 10, 2009)

kyboch said:


> Performance – cannot become defensive in market downturns


Most of the other points have been addressed, but regarding the above, mutual funds are not much better off than passive ETFs.
Very few mutual funds were able to move into defensive positions during downturns, whether it was a severe one like 2008 - 2009 or the relatively milder correction of last summer (Aug 2011 onwards).
Mutual funds are required to stay invested within their sectors and mandates.
They are neither hedge funds nor individual DIY investors, and cannot swing in and out of positions (i.e. market time) the way an individual DIY investor can.

The vast majority of mutual fund holders suffered the pain through all the downturns in the last 10 years.

Also, using _performance _and _mutual funds _in the same sentence is funny


----------



## PMREdmonton (Apr 6, 2009)

Some of the points she brought up are valid.

You can also buy index mutual funds with fairly low MERs and TD e-series and RBC have a bunch of fairly good ones. So you can stay with mutual funds and still go a low-cost index fund approach.

In general, the costs of ETFs vs. index mutual funds favors ETFs for accounts worth more than $80K or so due the cost of commissions. This spread will be lower if you trade very infrequently and use a low cost discount brokerage. Many traders will now give you trades for under $7.

You can buy as many or as few shares of an ETF as you want and it will not affect the price you pay. You usually should try to buy in decent sized chunks so that the fee paid is less than 0.5% of the total cost of the transaction is a general rule of thumb I try to adhere to.


----------



## kcowan (Jul 1, 2010)

HaroldCrump said:


> Very few mutual funds were able to move into defensive positions during downturns, whether it was a severe one like 2008 - 2009 or the relatively milder correction of last summer (Aug 2011 onwards).
> Mutual funds are required to stay invested within their sectors and mandates.
> They are neither hedge funds nor individual DIY investors, and cannot swing in and out of positions (i.e. market time) the way an individual DIY investor can.


In fact, it is this structural inefficiency that makes MFs so bad as investments. Who would pay their fees if they were sitting in cash?


----------



## OntFA (May 19, 2009)

For what it's worth, here is the opinion of a financial advisor that is not licensed to sell ETFs but who is nonetheless knowledgeable about these things.



kyboch said:


> commission fees to buy and to sell


This is valid if doing frequent transactions but there is now a pretty long list of ETFs that can be bought commission-free.



kyboch said:


> fees for fee-based brokers


This of course applies only if going to a broker who will advise you on ETFs. In that case, it's very true because the minimum fee for most broker fee based accounts is 1% unless your portfolio is $500k or more.



kyboch said:


> Dividends are not automatically re-invested – additional commission fee


Like the first point it depends - on the ETF and the broker.



kyboch said:


> RIPs and SWPs – commission fees for each one


This is no different than the first point - e.g. that frequent trades result in higher costs.



kyboch said:


> Generally purchased in board lots of 100


Others have talked about this. For more liquid ETFs (or stocks for that matter) odd lots are no problem and no more expensive.



kyboch said:


> Liquidity – some smaller ETFs may have liquidity issues


This is a biggie. ETFs have two levels of liquidity. The first level is the most obvious - trading volume of the ETF units. But the most important liquidity is measured by the underlying securities. The new Vanguard MSCI Canada ETF, for example, shouldn't be a concern at all since these stocks are generally very liquid so no problem if the ETF itself doesn't trade that often so long as the underlying securities are liquid.



kyboch said:


> Performance – cannot become defensive in market downturns


Not a valid issue IMO.



kyboch said:


> Index overweights – cannot re-balance


Legitimate concern for market cap weighted index ETFs but there are now many equal weight ETFs, fundamental indexing ETFs, etc that address the criticisms of traditional market cap indexes.



kyboch said:


> Supply and demand – could cause price to deviate substantially from intrinsic value


This is related to the liquidity issue. If doing this on your own, you'd better learn about the basics of trading mechanics. Less of an issue with the most liquid ETFs but for some of the more "innovative" ETFs, this is an important issue.



kyboch said:


> And finally:
> I spoke with _____ this afternoon as well as our Asset Specialist through ____ Asset Management, and they both agreed that there is a longer time horizon needed when investing in an index, either directly or through an ETF.
> 
> What??


This is a bit of a stretch.  Don't get me wrong, it's true what she says. But this is true of ANY investment including significant investments in stocks. Stocks require a long time horizon - indexed or otherwise.


----------



## OhGreatGuru (May 24, 2009)

kyboch said:


> ..
> 
> commission fees to buy and to sell
> fees for fee-based brokers
> ...


Have you read the boiler-plate warnings about the risks of mutual funds in any prospectus lately? They make mutual funds sound just as bad. (7 pages long in RBC's prospectus)


----------



## OntFA (May 19, 2009)

CanadianCapitalist said:


> Look at the evidence. ETF premium/discount from NAVs are widely published. The only time I can recall when popular ETFs failed to track NAVs was during the flash crash of May 2010. Even during the financial crisis of 2008-09 ETFs managed to track NAVs extremely well.


There are exceptions. I had a client bring me their discount brokerage statement a couple of years ago showing trades on a day when the U.S. markets were closed. He had traded in both XSP and TD U.S. Index CN - e series. The client was confused by what happened since he did a trade in both funds but the TD mutual fund was down (good for buyers) while the ETF rose in price that day (and the client ended up paying more for the ETF). I forget whether it was Martin Luther King Jr day or what it was but Cdn mkts were open.

The mutual fund uses fair value pricing. Not sure if the ETF does too but what the ETF does for NAV purposes and what happens in the market are two different things. And in the grand scheme of things, it may not matter but it's one example of how inexperienced investors can end up incurring higher costs - often unbeknownst to such investors.


----------



## CanadianCapitalist (Mar 31, 2009)

OntFA said:


> There are exceptions. I had a client bring me their discount brokerage statement a couple of years ago showing trades on a day when the U.S. markets were closed.
> 
> And in the grand scheme of things, it may not matter but it's one example of how inexperienced investors can end up incurring higher costs - often unbeknownst to such investors.


I disagree that the example above is an exception. It is quite normal for ETFs to price in news, earnings announcements, economic developments etc. during the time the markets of the underlying assets are closed. Example: VEA continues to trade in New York even after European and Japanese markets close.

In your example, it is possible that the TD e-Series fund reflected the changes in the value of the CAD whereas XSP, which hedges currency exposure did not react as much. All of this is normal and exactly how one would expect the markets to work.


----------



## OntFA (May 19, 2009)

CanadianCapitalist said:


> I disagree that the example above is an exception. It is quite normal for ETFs to price in news, earnings announcements, economic developments etc. during the time the markets of the underlying assets are closed. Example: VEA continues to trade in New York even after European and Japanese markets close.


Okay but I cited this as an example of where market prices did not appear to track NAV. TD has been doing fair value pricing for a long time - before the market timing scandal - which is why their funds weren't used the way others were to take advantage of price discrepancies.

On this particular day, the NAV was stale and the market price kept moving - in the opposite direction to what the team at TD calculated for the same day.



CanadianCapitalist said:


> In your example, it is possible that the TD e-Series fund reflected the changes in the value of the CAD whereas XSP, which hedges currency exposure did not react as much. All of this is normal and exactly how one would expect the markets to work.


I don't think so. This was the currency neutral version of the TD fund (see my CN notation in my post on this). So nothing normal about two funds tracking the identical index moving in opposite directions on the same day. I'll have to search for all of the details but in my memory it struck me as a dangerous day to buy XSP or any TSX-listed ETF investing in U.S. stocks. I helped my client get to the bottom of this so I'll do my best to find the details and, if I do, I'll post it here.


----------



## Financial Cents (Jul 22, 2010)

+1 and then some. I can't wait to read your post about this Ram - I'm assuming you're going to write one


----------



## Brad911 (Apr 19, 2009)

Did the advisor also ask you to answer 10 questions on their computer so they could sell you a portfolio of wraps? (mutual fund of mutual funds)


----------



## kyboch (Dec 23, 2011)

Oh my God what a stressful day! Finally got my MF sold but not after receiving a call from the president of the bank telling me that index investing is a high risk strategy because you're not protected against market downturns blah blah blah blah....
I told her that of course I wasn't going to be investing 100% of my money in equity ETFs and that my bond allocation was 45%, equities 55% and that's what would protect me in a market downturn, not moving my asset mix according to the market which is what the banks do they call it tactical asset allocation I call it market timing. If you look at the charts for pretty well any equity MF between 2007 and 2010 and compare it to the TSX Total return you can actually see that they were late getting out but even worse is they were late getting back in thus the pitiful returns in that period. Most still haven't fully recovered today.

They HATE ETFS so much! I mean she sent me an entire email about the evils of ETFs, but get this I printed out the top holdings of one of their MFs called "The CIBC Balanced Fund" Here it is
http://www.theglobeandmail.com/glob...nds/summary/?id=17549&cid=CIBC Securities Inc.

Scroll down the page a ways and check out it's top holdings. Yep iShares FTSE China FXI and Vanguard MSCI Emerging Markets VWO are 2 of the top ten. Go figure. I printed this and showed it to my ex adviser, she got a glazed look on her face and for the first time in a long time was basically speechless....

I also stole a trick from Andrew Hallam's blog:
http://andrewhallam.com/2012/02/how-canadas-banks-let-canadian-investors-down-part-6-of-7/

and printed out a bunch of their MFs compared to the S&P TSX Completion Total Return. I did this on globeinvestor. Every single MF I looked at (about 8 or 9) trailed the TSX substantially from Oct. 2006 to today (that's the time I have been in them) and over the last ten years it gets even worse. So much for their highly paid fund managers and their magical ability to beat the markets. I can't beleive I payed them so much money for doing worse than the market for all these years!

I'm just glad to be free of them and happy to be taking control of my money at last.


----------



## Jesse (Jan 21, 2012)

^^^^Good for you. I waited until Jan for the 10% free redemption on my DSC funds and then cut them loose. It still cost me 4%, but it's been a month and I'm back in the black and just glad they're gone and I can move on.

Keep us updated with your progress!


----------



## lb71 (Apr 3, 2009)

kyboch said:


> Finally got my MF sold but not after receiving a call from the president of the bank telling me that index investing is a high risk strategy because you're not protected against market downturns blah blah blah blah


The must be quite the portfolio if the president is calling you.


----------



## andrewf (Mar 1, 2010)

It will probably take many years, but I suspect the big MF sellers will need to seriously rethink their business model.


----------



## kcowan (Jul 1, 2010)

Now if we can just tell the "expert" advisors to stop lying to their clients...


----------



## Four Pillars (Apr 5, 2009)

They hate ETFs because they don't make money from them. I think that's a fair opinion. 

For anyone planning to do a similar move - you don't have to contact your current advisor for any reason.

Set up the new investment account and request the new company to transfer the funds over - that's it. You don't have to explain anything to the old advisor or the president.


----------



## Xoron (Jun 22, 2010)

Four Pillars said:


> Set up the new investment account and request the new company to transfer the funds over - that's it. You don't have to explain anything to the old advisor or the president.


Unless your wife thinks its only *fair* to tell them first  I'm in this situation right now, trying to setup an appointment with a TD investment advisor to get my wife out of her Mutual Funds and into ETFs. I'm worried that the IA will sway my wife back, but I think I have all the ammo I need. 

Seeing the actual under-performance of a MF vs the equivalent ETF sure makes it hard to argue against switching.


----------



## the-royal-mail (Dec 11, 2009)

Why does your wife feel the existing guys are owed an explanation? By making an appt with them, you'll be giving them every opportunity to talk you out of it. They're trained to sell and to retain clients, so expect lots of warm and fuzzy stuff, along with a narrative about how they value their clients, your relationship with them and the like. At the end of the day it's just business and they tend to be very personable people and will be ready to try and keep you. Having you paying those fees is their bottom line. 

Trust me, I've had this kind of conversation before and it just ended up being a waste of time.


----------



## Xoron (Jun 22, 2010)

TRM: This is our third go around at this in the last 5 years. The difference this time is that I have my wife thinking like I do before we go for the meeting. (I've even gotten her to agree that no matter what the IA says, we'll be switching after the meeting anyway)

I don't believe we owe the IA anything at all. But it's not my account, it's my wife's RRSP. Ultimately it's her call.


----------



## Uranium101 (Nov 18, 2011)

So, more and more people are moving out of mutual funds ehh?
The ETF market isnt any better. They have created many gambling vehicles tgat act like tools they use in casinos. They are a lot more dangerous than any mutual funds.


----------



## Four Pillars (Apr 5, 2009)

Xoron said:


> Unless your wife thinks its only *fair* to tell them first  I'm in this situation right now, trying to setup an appointment with a TD investment advisor to get my wife out of her Mutual Funds and into ETFs. I'm worried that the IA will sway my wife back, but I think I have all the ammo I need.
> 
> Seeing the actual under-performance of a MF vs the equivalent ETF sure makes it hard to argue against switching.


Mmm... is there any way you can transfer the account first and then tell your wife?


----------



## RedRose (Aug 2, 2011)

*kyboch:* 
I finally went in to see my FP at my bank on Monday. He had been asking me to go in to change the mix on my RRSP so I thought I would just have to sign something. I have been avoiding this for a while due to the anxiety it causes whenever I have to sign financial things.
Seems he just wanted me to go in to chat about what I am doing with the lump sum.
Of course they do get defensive if they think you are firing them. I mentioned that I had seen a Life Ins guy and he had told me about annuities and segregated income funds annuities or a hybrid of both plus they would manage my existing RRSPs. 
The FP of course shot the ins guy down in flames.


----------



## humble_pie (Jun 7, 2009)

pillars you're not being serious, are you.

transferring wife's account without telling her is straight out of the dark ages. Before married women had the vote.


----------



## Four Pillars (Apr 5, 2009)

humble_pie said:


> pillars you're not being serious, are you.
> 
> transferring wife's account without telling her is straight out of the dark ages. Before married women had the vote.


You know I'm joking.

Besides - did they have investment accounts back in the dark ages?


----------



## gibor365 (Apr 1, 2011)

Four Pillars said:


> You know I'm joking.
> 
> Besides - did they have investment accounts back in the dark ages?


Sure, they just invested in more usefull things 

I have full trading authority on all my wife accounts and she even doesn't know (and doesn't want to know) how to access them online.
I asked you couple of time when had some free cash, what she wishes to buy into her TFSA or LIRA,.... she just telling to leave her alone and she doesn't care ...


----------



## humble_pie (Jun 7, 2009)

gibor this doesn't really fit the biscuit, you've already told us your wife holds a significant position in a big international bank ... now you're trying to put her back into a 14th century kitchen, barefoot ?


----------



## gibor365 (Apr 1, 2011)

humble_pie said:


> gibor this doesn't really fit the biscuit, you've already told us your wife holds a significant position in a big international bank ... now you're trying to put her back into a 14th century kitchen, barefoot ?


Why not?!  Yes , she holds significant position in big bank, but she doesn't like to deal with our accounts and discount brokerage, so I'm doing everything money related


----------



## Homerhomer (Oct 18, 2010)

gibor said:


> Why not?!  Yes , she holds significant position in big bank, but she doesn't like to deal with our accounts and discount brokerage, so I'm doing everything money related


Gibor, is your wife investment advisor or financial planner 

Just pulling your leg ;-)


----------



## gibor365 (Apr 1, 2011)

Homerhomer said:


> Gibor, is your wife investment advisor or financial planner
> 
> Just pulling your leg ;-)


Negative  She's Architect....


----------



## kyboch (Dec 23, 2011)

Well I have been with this adviser /salesperson for over 5 years and I felt it was the right thing to do to go face to face. I'm old school that way. Yeah it was bloody stressful and like someone said here earlier they definitely planted all kinds of FUD in my brain. But now I am settled down I can see it for what it is. It's just a big game. I mean the most important word I've learned lately is fiduciary 

"Fiduciary is a legal or ethical relationship of confidence or trust between two or more parties....In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts....A fiduciary duty is the highest standard of care at either equity or law."

Well no matter how much they tell you they're concerned about you and no matter how friendly and caring they act and no matter how much they ask you about your kids and your wife and no matter what great people they seem to be, THEY ARE NOT ON YOUR SIDE ONE BIT! Don't EVER forget that!! Their primary and ONLY goal is to make money off of you for themselves and the bank. 
Most Canadians are EASY prey to these vultures because we ARE so polite and SO trusting and sadly uninformed. On another thread I mentioned that I saw a fee only adviser recently and I would highly recommend people to do that. This guy wasn't trying to sell me anything and he gave me excellent unbiased knowledgeable advice. My relationship with my fee only adviser is 100% fiduciary. My relationship with my CIBC financial adviser was 100% NOT fiduciary. She just used my inexperience against me to create profit for herself and the bank. 
Betrayal is the WORST thing you can do to another person yet that's what these people do everyday to thousands of unsuspecting customers. It is a disgrace and should be illegal.


----------



## Belguy (May 24, 2010)

Financial services salespersons are just like any other salespersons. When you go to an auto dealership, does the salesperson tell you that you don't need a car? When you go to the electronics store, does the salesperson tell you that you don't need that new big screen TV?

Just as long as you understand when you are dealing with a salesperson whose prime concern is to please his or her boss and put food on the table for his or her family with your interests coming somewhere after that.

It's your money and it's up to you whether you want to take control of it and put your best interests first or whether you want to pass on that responsibility to someone who doesn't put your best interests first.

We are in an age of very low returns which makes those fees all the more important because they can effectively wipe out any gains that you might expect going forward. Then, the only people making money off of your money will be the financial services industry which has, after all, a huge overhead to pay for and you will end up being the payee.

Buyer beware!!


----------



## kyboch (Dec 23, 2011)

It's the term that screws people over. "Adviser" or "Planner" implies someone who gives you advice about what's best for you where as salesperson implies someone who wants to sell you something. I guess other business should start using those terms too:

Transportation Adviser
Home Entertainment Planner

The whole thing is a joke. Belguy is right buyer beware.

And Muldaur was right too, "Trust no one" ESPECIALLY if they work in a bank!

http://www.youtube.com/watch?v=RAKsMnAM8vk&feature=related


----------



## gibor365 (Apr 1, 2011)

kyboch said:


> Most Canadians are EASY prey to these vultures because we ARE so polite and SO trusting and sadly uninformed.


Completely agree. When I immigrated to Canada 12 years ago I was so surprised to see it.
Still i don't understand why so many Canadians invest into Seg or LSIF funds. I work in similar industry and i see how those products extremely complicated and hardly anyone really undestand them. And those guys charge 3-3.5% MER 
Another point that those reps from CIBC or TD are very unknowledable and even if they were on your side, they are useless.


----------



## gibor365 (Apr 1, 2011)

kyboch said:


> And Muldaur was right too, "Trust no one" ESPECIALLY if they work in a bank!


Not just bank , but any financial organisation. They don't produce anything and live like parasites playing with ppl money for their own advantage.


----------



## Belguy (May 24, 2010)

I often tell the story of when I held my last annual visit with my financial services salesperson (read mutual fund salesperson) many years ago now. During our visit, we went over my latest losses and he suggested selling some of the funds that he had previously recommended and buy some different, but still high fee funds. On our way out the door, this complete bore proceeded to ask me how I liked his beautiful, brand new Lexus which he had recently purchased. As I trecked to the bus stop to go home, I decided then and there that I was going to dump this guy and take charge of my own investments. After doing some research and a bit of reading, I set up a discount brokerage account and proceeded to set up a version of the 'Couch Potato' portfolio. This turned out to be one of the best decisions of my life and I have never looked back. As far as I'm concerned, I will leave these salespersons to deal with other victims as I now manage my own low fee, index portfolio.

We grow too soon olde and too late schmart!!


----------



## humble_pie (Jun 7, 2009)

it's true dormouse, you have often told this story.


----------



## Belguy (May 24, 2010)

What's a dormouse? Is that a good thing to be?


----------



## stephenheath (Apr 3, 2009)

I think dormouses are the rodents that hibernate most of the year, so as a fellow buy and holder I'd say it's a good thing


----------



## dogleg (Feb 5, 2010)

Well worth repeating Belguy. Gibor mentions SEG funds and wonders why people buy them ; so do I. A person who is my cottage neighbour runs a business where he sells mainly SEG funds. He is making a fortune and people flock to him based on his massive advertising . I have often talked to him and explained why I would never buy one . His answer : my enemy is the well informed! So much for that .


----------



## Fain (Oct 11, 2009)

All mutual funds are a joke. Hedgefund investing is much better for people looking for others to manage their money. Arbitrage Opportunities, no Short-Selling Restrictions, and Increased Leverage. 

I prefer to do my own trades however


----------



## Belguy (May 24, 2010)

Some tricks of the trade for financial services salespersons:

http://www.theglobeandmail.com/glob...uth/article2342697/singlepage/#articlecontent

Trust but verify:

http://www.theglobeandmail.com/glob...tem/article2342799/singlepage/#articlecontent


----------

