Weekend Reading: Your Trusted Advisor Edition

The financial services industry is in dire need of change. It’s such a me-too industry brainwashed to believe that all you need is a regular meeting with your trusted advisor and your financial literacy problems will be solved. Look no further than the 100+ comments to Rob Carrick’s question on LinkedIn, wanting to hear fresh advice from financial planners and advisors on the one thing they’d change about how Canadians manage money.

Predictably, most replies were self-serving drivel that talked about the benefits of working with a planner, how people should stop making decisions based on fees, understand the importance of downside protection, or get MOAR INSURANCE!

The industry still clings to the idea that advisors can add value picking winning investments, like somehow they can deliver market beating returns in good times (and bad!).

I don’t link out to Garth Turner that often but he absolutely nails this post where a reader presents her advisor’s arguments for why she shouldn’t switch from mutual funds to ETFs. The trusted advisor’s argument included this gem:

ETFs are cheaper but that is because they have a much lower rate of return. So if you compared mutual funds to ETFs, Mutual funds are far better.

Ugh. And Canadians have $1.4 trillion invested in mutual funds. We have a long way to go before any real change happens.

For the record, my answer to Rob Carrick’s question:

“To work with me, your trusted advisor.” 🙄

How about: To understand that while your advisor might be a nice person, he or she works within a system designed to sell you products that aren’t in your best interest, extracting annual fees higher than anywhere else in the world. These fees will have the biggest impact on your long-term investment returns and greatly affect your ability to reach your retirement goals.

This Week’s Recap:

On Wednesday Marie continued her ‘Building Your Wealth’ series with a look at how to evaluate potential stocks.

On Friday Kyle Prevost stopped by to talk about Canada’s robo advisors and how simple beats sophisticated.

Weekend Reading:

Bitcoin has dominated the news recently, with the volatile cryptocurrency surging in ‘value’. One Bitcoin is now supposedly worth more than $19,000.

In a true act of irrational exuberance, this couple has invested more than $100,000 in the machines, electricity, and space to mine new Bitcoins.

Here are seven lies Bitcoin fans tell themselves (and anyone else who will listen).

Moving on from the Bitcoin chart, Maclean’s is back with its year-end Chartapalooza – the 91 most important economic charts to watch in 2018.

Dan Bortolotti answers a reader question:

“I’m moving investments to an online broker. Will they cover my fees?”

Jonathan Chevreau presents a strong case for early RRSP drawdowns. This is something I’ve considered for the decade between age 55 and 65.

Jason Heath with some terrific insight: Here are the six biggest mistakes retirees make with their investments.

Two conflicts of interest that can prevent you from getting the best financial advice — one blatant and one hidden.

Michael James shares a story about helping an elderly relative sort out her finances after her husband died.

“A lot of pain could have been avoided if Bob had either made Carol pay attention to the finances, or had at least left an up-to-date list of institutions, account numbers, and other contact information.”

Is an RRSP worth it if you’re retiring abroad? Jason Heath says it can make sense from a tax perspective but might make investing a hassle.

Canada Revenue Agency confirmed this week that the 2018 TFSA limit will remain at $5,500.

Rob Carrick says it’s time for a frank discussion of your excuses for not giving to charity.

Frugal Trader explains how to maximize PC Plus Points.

Air Canada earned more than $1 billion from ancillary fees last year, charges for items such as ticket changes, upgrades, baggage, seat selection, sales of food and beverages, entertainment and wireless internet access, etc.

Finally, a behavioural finance expert writes about aging, providing for future generations, and the tough transition that many face.

Have a great weekend, everyone!

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3 Comments

  1. John on December 10, 2017 at 8:05 am

    This is a problem that in my mind will take a long time to change. It’s the “trusted advisor” that’s he problem. When we go and see our advisor we talk with a person that is nice and friendly. Canadians are known to be nice and apologetic, so of course our advisor is nice. We are told and read about advisors that are taking people to the cleaners, but they are not talking about my advisor…. My advisor is not like that, right? We want to think and believe our advisor has our best interest at heart. It would be far more advantageous if we wouldn’t have to talk to advisors in person. But that would mean we either have to do it ourself, use robo-advisors or use advisors that are not linked to investments companies such as for fee only advisors. I went through this scenario myself and it took a while for me to see what was going on and to make the change. It’s very hard to “fire” your advisor because most of the time he or she is such a nice person. I chose to do it myself and I am doing better. There is lots of free and very good advice on the Internet form places like Moneysence.ca and Boomer&echo for example.
    Ultimately our trusted advisors are employees of an industry as per Robb’s comments, and we all try to make a living the best we can and make the most money doing it. So why would our trusted advisor be any different?

  2. Don on December 10, 2017 at 10:59 am

    Robb,

    I noticed a few good comments, such as not considering your house as an asset, and concentrating on controlling your spending. Then there is this little gem “Arthur Tu, CIM, CFPStop making financial decisions based on singular factors such as fees or performance” – I don’t think my eyes could have rolled further back in my head.

    So what this “professional” is basically saying is that he doesn’t want clients to judge their adviser (read him) based on their abysmal returns and sky-high fees. I can only hope that anyone who sees this and is a client, or knows someone who is, will find someone more appropriate. This goes for any one who is a client of an adviser with this attitude. “Professionals” like this one will cost people hundreds of thousands over their lives.

  3. sara on December 10, 2017 at 1:36 pm

    The advisors I talked to had one common theme between them.
    Bring us all your business under one roof to manage it properly.

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