Weekend Reading: What’s In A Name Edition

CBC Go Public is like a dog with a bone when it comes to going after Canada’s big banks. First it exposed the high pressure sales culture that has made its way down to the front-line – prompting bank tellers to open up about the aggressive tactics used to dupe customers into taking out new products or borrowing more money.

This week CBC took aim at ‘dealing representatives’ – bank salespeople masquerading as financial professionals. I’ve been arguing for years that bank salespeople don’t have their customers’ best interest at heart because the system is designed to put high-commission products ahead of actual financial advice.

However, the article took a bizarre turn when the author, Erica Johnson, said the banking industry gets around fiduciary duty by using the title ‘financial advisor’ instead of ‘financial adviser’, as if replacing an ‘e’ with an ‘o’ has any bearing on whether an individual or company is licensed to give investment advice.

Financial Advisor or Financial Adviser. What's in a Name?

This is a myth repeatedly used by invester investor advocate Larry Elford, which, in my view, is a nonsense argument that detracts attention from the real issue: unbundling product sales and advice by banning trailing commissions on mutual funds. By doing this, financial advisors (or advisers, whatever you want to call them) must offer a more holistic approach to financial advice in order to demonstrate value for their fees.

Bottom line: Banks employ salespeople to sell products that maximize profit for the bank and its shareholders. Those products are often not in their customers’ best interest, but are deemed okay under the current ‘suitability’ standard. For truly unbiased financial advice that is not tied to product sales, look for a fee-only or advice-only financial planner.

This Week’s Recap:

On Monday I wrote about why I don’t invest in a non-registered (taxable) account and why most people under the age of 40 will never need to to invest outside of their RRSP and TFSA.

On Wednesday Marie looked at how the various fees you pay on your investments affects your ability to accumulate wealth.

Weekend Reading:

About the only April Fool’s Day gag worth reading is Dan Bortolotti’s annual post on his Canadian Couch Potato blog. This year he contemplates what will happen to the markets if too many investors turn to indexing. Definitely worth a read.

Taking a more serious tone with the same topic, A Wealth of Common Sense blogger Ben Carlson plays devil’s advocate on the popularity of index funds.

Toronto resident and investment blogger Tim Bergin attended the Canadian Real Estate Wealth Expo to watch Tony Robbins and Pitbull explain how Toronto real estate is the path to riches. If this isn’t peak housing bubble, I don’t know what is.

Financial Uproar takes an in-depth look at investing in the Canadian mortgage market by comparing Home Capital Group vs. First National Financial.

Here’s a detailed look at the average ‘Joe Debtor’ and why he files for insolvency. Some key findings:

While not living in poverty, today’s Joe Debtor is using debt to make up for a low, intermittent or stagnating income. Already having difficulty making ends meet, his lower-than-average income makes it almost impossible for him to manage his debt-repayment obligations once his debts begin to accumulate:


  • Joe Debtor owes an average of $52,634 in unsecured debts, 7% below our previous study. It now takes less debt for Joe Debtor to reach a financial crisis.
  • Joe Debtor owes $1.85 in unsecured debt for every dollar he earns (after tax). His total debt-to-income ratio (including secured debt) is an alarming 778%.

Squawkfox Kerry Taylor fires back at those who equate achievement with luck instead of skill and hard work.

Sketch Guy Carl Richards uses his own kayaking experience to argue that sometimes spending brings a bigger return than saving.

We’ve all had that friend or acquaintance who gets tangled up with a pyramid scheme, multi-level marketing scam, or direct sales ‘opportunity’ and wants you to join in. Here’s what to do:

“Don’t go to the sales pitch. Don’t take the phone call. Don’t waste your time.”

Rob Carrick argues that homeowners in Toronto and Vancouver (or those who’ve taken on too big a mortgage in other cities) need to shift their focus from saving and investing to paying down their mortgage debt. This assumes, of course, that the homeowners aren’t house poor to begin with and have extra cash to deploy.

Did you know you can qualify for EI benefits in retirement? Jason Heath explains how.

Michael James works through a problem for a friend who feels ripped off because his pension benefits only go up by inflation each year, even though his plan’s assets grow at a faster rate. His friend is conveniently ignoring the fact that his plan must account for him living until he’s 120.

Finally, Mark Seed from My Own Advisor looks at the FIRE movement (Financial Independence, Retire Early) and how adopting this extreme view on frugality and savings would affect his current, more balanced, lifestyle.

Have a great weekend, everyone!

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  1. Emma on April 2, 2017 at 6:05 am

    Another good line up 🙂

    I enjoyed the piece about spending for tomorrow. I recently signed up for music lessons – something I’ve always wanted to do – and there’s this little part of my brain that says “shouldn’t you be investing that money instead? Can’t you learn from Youtube videos?”

    But then I pick up my instrument each day and think “totally worth it!”

    My father used to tell me you need to save for tomorrow, but be present today. We lost him sooner than we expected, so I’m glad he lived by this rule and we have many good memories.

  2. DJ on April 2, 2017 at 7:57 am

    Hi there,
    just got a question on the pension. it appears i am eligible for pension at work (using Defined Contribution and Defined Benefit Plan).
    Now it appears the formula for Defined Benefit (DB) greatly reduces the available RSP contribution room (by like 50%).

    In your opinion, is it still worth then contributing to this? (The formula is basically [9 x (1% of your annual salary) – $500] that gets taken away from RSP room)

    Basically I would be left with no room for RSP contribution as the employee sharing plan + Pension contributions would make my RSP contribution room to $0 for all years going forward (assuming I still work at the current employer).

    Any thoughts would be appreciated. Thank you!

    • KJH, Actuary on April 2, 2017 at 9:15 am

      DJ, Generally the answer is to join the plan. The offset to your RRSP room is your Pension Adjustment – your contributions are part of that, not on top. Your employer contributes as well, meaning you get more in retirement savings than your lost RRSP room. Also, the plan pays you for life and you don’t have to worry about investing the money or out living it. The only time it isn’t a good deal is if you’re really young (under 30) and don’t plan on staying for more than a couple of years. In that case, the Pension Adjustment probably eats up too much room.

      • CLP on April 2, 2017 at 9:53 am

        KJH, one of the best replies to this type of question I have seen. Clear and factual, but explained in a way that any inexperienced employee can easily understand. And correct!

      • DJ on April 2, 2017 at 10:49 am

        KJH, thank you for your response.
        I am under 30 and don’t know if I plan to stay here longer than 5-10 years.

        By my calculations, I may have to lower my contributions to the pension plan so as to not go over RSP contribution room every year (assuming no contribution is left over from prior years).


  3. Madrigal on April 2, 2017 at 3:57 pm

    About adviser vs advisor: you have a point that the quibble is nonsense; but the reason it’s significant is that the financial regulators allow salespeople to explicitly get away with claiming to be financial advisors/advisers to the public, provided they spell the word in a way that satisfies regulators.

    That directly allows the salespeople to deceive the public, and makes no sense when you bear in mind that regulators are explicitly required to protect the public.

    Yes, there are other fish to fry, such as pernicious trailing commissions; but they don’t exclude the need to educate the public to the way the financial services industry is “serving” it badly and in fact serving itself directly at the expense of its customers.

    • Echo on April 2, 2017 at 4:46 pm

      The title doesn’t mean anything – anyone outside of Quebec can call themselves a financial planner or adviser. It’s the specific license that is regulated – anyone trading securities or giving advice on securities must be registered with a provincial regulator. Most bank ‘advisors’ are only licensed to sell mutual funds.

      Forget the ‘e’ vs. ‘o’ argument. If you want to get serious about these titles then don’t permit someone to call themselves a financial advisor or financial planner if he or she is only licensed to sell mutual funds or insurance.

      Advisor vs. adviser is just a style preference, like color vs. colour. It’s not a loophole that the banks have managed to exploit in order to satisfy regulators.

  4. Rol on April 3, 2017 at 6:44 am

    Hi y’all
    Re: “the big bad banks ”
    If it wasn’t for these guys/gals I wouldn’t be where I am today, house, car, boat.
    I don’t expect many who follow this blog would pay the sticker price when buying a car (whether new or used) because you did YOUR HOMEWORK first.
    I don’t have a pension from my employers, I do have somewhat of a pension from the big bad five in the form of dividends as I suspect the majority of readers do. We need to convince people to do there homework, unfortunately they are sipping at Starbucks and not reading blogs like this.

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