When I was younger I had the opportunity to work for Vector Marketing, the sales arm of Cutco Corporation and the maker of Cutco cutlery – speciality knives with a forever guarantee.

The job listing said no experience necessary and it wasn’t all commission-based – you received a guaranteed base rate of pay every time you made a qualified appointment (sales demonstration).

Related: How a career change improved my life

The knives were quite remarkable.  In the demonstration I got to show off their superior cutting ability by slicing through an inch-thick rope in one stroke.  I even cut through a penny with the $119 super-shears.

All of my customers were wowed by the demonstration and ended up purchasing a knife set.  I was that good!

But after selling to my parents, grandparents, aunts and uncles, my enthusiasm for the process waned and so I ended up quitting after a few weeks.

“Mom, I think you need a Universal Life Policy”

Years later I looked into a career at Clarica Life Insurance – now part of Sun Life Canada.  The job was to sell insurance products and mutual funds.  Similar to the Cutco job, you aren’t handed a client list so you must resort to calling friends and family – people you know – in order to get started.

And similar to my Cutco experience you might have some success early on.  After all, your friends and family trust you and want you to succeed.  Surely you’ll look after them.

Related: How a lucky break launched a successful career

I turned down the job – commission sales were not for me.  But that’s where I’d like to turn the story around and ask: How many of you have been approached by a friend or family member (or friend of a family member) to buy investments and life insurance?

The new advisor salesperson may have good intentions, but does he or she have your best interests at heart?  The problem with Sun Life, or Investors Group, or London Life, or Industrial Alliance, is that they focus on selling products – specifically their in-house products which happen to cost twice as much (or more) than other products on the market – instead of giving financial advice.

Maybe you’ll get Universal Life insurance instead of Term insurance, segregated funds instead of index funds, basically any plain vanilla instrument could be turned into a complicated set of products that your advisor salesperson will pass off as strategic asset allocation.

You can check out any time you like…

Trying to untangle yourself from this complex web of products might cost you a pretty penny.  That’s why you should exercise caution before purchasing any investment or insurance products.

Related: Can you trust advice from your bank?

A Universal life insurance policy is essentially term insurance plus a savings component – the insurance industry’s answer to “buy term and invest the difference”.

The insurance policy has a cash surrender charge to discourage you from cancelling before the term matures.  In the first few years, most of your savings component is likely used to pay the advisor salesperson and the insurance company – leaving you with nothing should you decide to cancel.  This surrender period could last anywhere from seven to 10 years.

With segregated funds, you’re looking at Management Expense Ratios well in excess of 2 percent.  There are additional fees charged if you decide to sell the funds within seven years of purchase.  That’s called a deferred sales charge and it might look something like this:

If you sell within:

  • 1st year 5.5%
  • 2nd and 3rd year 5.0%
  • 4th and 5th year 4.0%
  • 6th year 3.0%
  • 7th year 2.0%
  • After 7 years 0.0%

Breaking up with your “trusted” advisor

So what do you do if you’re faced with this scenario?  Will it be uncomfortable to tell your advisor salesperson that you’d like to make changes to your portfolio, that you’re not happy with the way he or she is managing your finances?  Probably.

Related: How to transfer your RRSP to another bank

But if it’s your intention to move your money over to another institution then that conversation doesn’t need to happen – at least not the uncomfortable one about wanting to take your money somewhere else.  Your new bank or financial institution will make that request and transfer the money for you.  They might even agree to pay any fees associated with transferring out of your old institution.

Final thoughts

I still have those Cutco knives – I think my parents do, too.  They’re great knives, and they should be for the price you pay.  But the only reason my parents, grandparents, aunts and uncles have these knives is because of who sold them.  They could’ve easily picked up a 6-piece set of Komachi knives at Costco for $29 which are just as good, if not better than the Cutco knives.

So the next time you get a phone call from your nephew or from a friend of a friend telling you all about his new job as a advisor salesperson, tell him you’re thrilled, tell him you’d love to go for coffee or a beer to celebrate, but be careful about entering into a financial agreement that might not be in your best interests.

Related: My advice to switch out of mutual funds draws the ire of an industry group

A simple “no thank-you” up-front might save you from an uncomfortable conversation in the future, and save you thousands in unnecessary commissions and fees.


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