Is your investment “firm” pulling the old “bait and switch”?
Lets imagine for a moment that not every investment “advice” giving company has your best interests at heart. I realize that Goldman Sachs has stated that they are doing “God’s work”, and some Canadian firms are voted as Canada’s “most respected” companies, but give another view a chance for just a few seconds. Imagine that they may be large, hungry corporations that care first and foremost about profits. Go with this mind game for just a few minutes and see where it takes your thinking. I will guide you through the process.
Lets take the imagery to where it involves you, your retirement saving and investing. Where it determines the difference between your retiring rich or poor.
Industry advertisements say that they are an industry you can “trust”.
And yet the industry fights behind your back, with your political parties and others to not have to place the interests of customers ahead of their own interests. Is that the impression they give when they place full page advertisements in your newspaper, that they DO NOT place your interests ahead of their own, when selling investments or investment advice. I only ask you to look more carefully at the next full page investment ad you see. You may be seeing an implied lie that could be of help to you down the road, when you have a complaint.
The promise, written or implied that “you can rely on us”, “we are professionals” is also worth taking note of before you invest. Did you know that these same corporations, these same trusted firms tell their 80 year old and 90 year old clients, when they eventually take them to court, things like, “you were the author of your own misfortune”, and, “at no time were we acting in a fiduciary capacity for your account”. In other words (quite literally) they tell trusting and vulnerable senior citizens that “you were on your own the whole time”. See “cases” at www.investorvoice.ca. (Hunt case, Cosgrove case, etc)
Speaking of fiduciary duty, or duty of care. The investment industry in Canada has fought long and hard to NOT have to deliver a fiduciary duty to Canadian investment customers. That is correct, they fight every year to deliver less than professional practices to their customers. Do they tell you that in their ads? No, they do not.
They earn more money if they don’t have to live up to professional practices. Are you starting to imagine how some firms earn a billion dollars every three months? Are you asking yourself just what ARE they promising with the full page ads? Now you are starting to become aware of what could be the world’s largest bait and switch campaign. A campaign which promises a trusting and reliable, professional level of investment management, ……..and then delivers a bank employee, with a three month correspondence course, calling himself or herself and “advisor”, while selling nothing but bank products. Could it happen to you? Your children?
So far we have talked about the big word “fiduciary”. Look it up if you want to see how well we perform the bait and switch.
We have also talked about “duty of care”, which is close to fiduciary, but can be one step below, like the duty to “place your interests ahead of the interests of the firm”. We now know, (from court documents) that those who promise you “wealth management” and trusted advice, are not under any obligation to place your interests ahead of their own, and they do NOT owe you a fiduciary duty. That should be news for many.
So what standard of care DO they owe customers?
Imagine a standard where the investment has to be “suitable” before they can sell it to you. Did I say “most suitable”? No, that would interfere with profits and we never EVER put anything into law that requires us to interfere with profits. Sorry, I had a flashback to my industry days.
So they can pretty much sell you anything, and if there are two items of identical investments, they can sell you the one that pays them the “highest commissions or fees”, which they do about 80% of the time. (they can still say it was “suitable” because we never promised you it would be “most suitable”……na, na, na boo boo)
In 2007, the sale of high cost “wrap” funds was 91% of all mutual funds sold. Look up wrap funds and see if they don’t tend to be the most expensive to the customer, and most profitable to the industry. (up to 26 times more profitable according the the Ontario Securities Commission)
So, the advertisements imply professional behaviors, they imply professional codes of conduct will be followed for you, they imply that you can rely on them, trust them with your life’s work. What else? Lets see, they also imply that the world of investing is “complicated” and that you need to rely on them as your trusted “guide”. Nearly everything that is required to establish a fiduciary relationship……and yet the Canadian investment industry takes 90 year olds to court and beats them every time (correct me if this is wrong please) saying they DO NOT owe a fiduciary duty to you. They do not even owe you a duty to place your interests ahead of theirs. They DO NOT even owe you a duty to sell you the most suitable investment choice. Even when two investments are otherwise identical?
I must have forgotten a great deal, because that very question, was on my ethical “conduct and practices” exam before I got my license. I wonder how the question of putting the client first is in our training literature, our exams etc, got so far lost. When we see 80% to 90% of the business practices (as measured by sales stats) do not put the interests of the client first, and do not even place the client into the more suitable investment, much less the “most” suitable choice. Aren’t lawyers great with words?
So the only standard, by which the industry can be measured is that they will set a standard to put customers into “kinda suitable” investments? Is that it. “Kinda” suitable. And who will be the judge of “kinda” when a complaint arises? “Our lawyers and regulators whom we pay.” Touché.
I have to end there, this imagination game is getting me down. See a few of these topics at www.investoradvocates.ca if you want to learn more. See the “cases” section at www.investorvoce.ca if you truly want a glimpse into “when things go wrong”. And a MUST READ is the case MARKARIAN VS CIBC at www.investorvoice.ca
There is a world of hurt out there, and I don’t believe it should come from people who promise that you can “trust” them. Simply put, they lie.
My name is Larry Elford and I am a financial fraud investigator, specializing in the world of investments. I do 99% of my investigations free of charge for people who have been abused by the system. I can be reached for questions at firstname.lastname@example.org