Financial Advisor versus Adviser

[Boered]

Interesting read.

 

 

 

By a Canadian investment malpractice ANALYST

I accepted a challenge from a reporter out west the other day, after I told them that 96% of people who claim ‘trusted advisor” status in Canada do not hold the license, nor the legal duty of a registered adviser. ("adviser" is the legal spelling found in the Securities Act, while regulators say "advisor" is a mere title which anyone can use without being licensed)

I set out to see if I could find a single licensed advisor or adviser, in downtown Calgary, and to share the results.  After two hours on the government authorized registrant check site (www.aretheyregistered.ca).  I found that 100% of the advisors in three downtown Calgary bank-owned investment offices held no adviser license or registration.  Instead the category of license/registration was in a salesperson capacity, (Dealing representative registration).

 

The Small Investor Protection Association of Canada, (www.sipa.ca) has recently searched the entire country, and found that approximately 96% of persons who promise or imply financial  “advisor” services to the public, carry only the 'salesperson' registration (dealing representative).

I find it amazing that Canadian’s life savings could be deceived into placing trust and money with licensed salespersons, and I outline the steps to this deception below:

First step:   Capture regulatory bodies by ensuring they are selected and compensated by the investment industry itself.  This has the effect of having a private ‘regulatory’ force…to police ones own financial behaviour.  This step is essential (and valuable) if the public is to be perfectly deceived.  Facade regulators.

Second step:   Pay these ‘regulators’ highly enough to ensure that they know who they are supposed to serve.  (the twelve highest paid employees among Canada’s Securities Commissions shared compensation approaching $16 million dollars over the two year span of 2015 and 2016.  To be specific, that is just shy of $16 million for twelve people.  (this source data on public record.)

Third step:   Hide the registration and agency-duty (or lack of duty), of 100,000 industry salespersons (Dealing Representatives) so that investors mistakenly assume they are dealing with a well regulated professional ‘adviser’ and hand over their retirement money willingly.  The public is never told they have a salesperson, and the regulators never enforce the “misrepresentation” portions of Securities Acts.  (Source data on public record)   Fake Advisors.

Fourth Step:  Commission sales agents (Dealing Representatives as opposed to lawful “Advisers”) use the deception in step three, to sell investment products of greater advantage to the dealer, and less advantage to their customers. (these salespersons can sell products and give advice based on the lowest agency-duty standard, called the “suitability” standard, rather than the highest standard of the “fiduciary” adviser)  Facade Trust.

Fifth step:  Without needing adherence to the fiduciary standards of a true adviser, they can also sell the public billions of dollars of investment ‘products’, some of which might be improper, illegal, or tainted in some way, in much the same manner as allowing ‘factory defective’ products to be sold to consumers. This is done by receiving from the regulators,  “exemption” from the laws of the Securities Act.  (Source data on public record.)  Facade Investments.

Sixth step:   Securities Commissions typically grant thousands of exemptions to public protective laws, in near secrecy from investors and without demonstrated protocol or process. 

Seventh step:   Provincial Finance Ministers, or those in government authority, are intimidated by the thought of trying to stop the financial harvesting of Canadians, and choose to ignore the misconduct instead.  Or as they say in Alberta, “shoot, shut up and shovel”, to protect the political party, while burying the public interest. (partial source data on record)  Facade Public Servants.

Outcome:   Systemic investment misconduct and malpractice can do financial harm to Canadians, of $25 to $50 Billion (or more) each and every year, with most of this money ending up on the profit statements of our trusted financial institutions. (Stats and partial source data on public record.)  What if this is the largest, hidden economic drain, in all of Canada?

In comparison, the financial harms/costs to Canada of the millions of cases of ‘street’ crimes in Canada is estimated to be around $50 Billion each year, according to Justice Canada and Statistics Canada.  (Source data on public record.)

Q:  Who is protecting Canadians from systemic financial exploitation, misconduct, and  malpractice?  

A:  I have found No person or agency who is paid a salary to protect Canadians, is willing to risk that salary and speak out about these industry exploitations.

This is a financial story, a political story, and a story of a two-tier system of justice. One for the highest status financial corporations, and another for everyone else.

Larry Elford, former CFP, CIM, FCSI, Associate Portfolio Manager, 

 Misconduct and Malpractice Analyst

Alberta   lelford@shaw.ca

In response efforts like this, the Alberta Securities Commission recently released this consumer warning which compares the "dealing representative' to a car salesperson at an auto dealership.  Unfortuntely, most investors will never discover this muted warning.  

Edited January 7, 2017 by Boered
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[ArcticCrusher]

 

Interesting read, but the author assumes advisers are outproducing advisors when they need to look at stats.  This is field where the ongoing research and correctly adapting to market conditions is the most valuable asset one can have, ie the title only gets you so far.  New fee disclosure rules this year should open some naive clients eyes to see what their returns vs fees truly are.  Perhaps the author should post his own performance over the past say 10 years as that would speak more volumes than any title or opinion he may hold. 

People really need to start taking a more active role in their financial futures instead of blindly trusting an advisor/adviser or whatever they wish to be called.  How many clients know where their FA's are personally invested and would it make sense to let someone who is  say 100% in fixed assets manage your mainly equity portfolio?  Or that the stock selections picked for you came from a recommended list?

The overwhelming majority (>95%) can't beat the indexes they are measured against, and yes there is an index for every type of investment.  There is lots of valuable online information (free and premium) out there for people to educate themselves.  Long term consistent track records are important.  

[Stoney]

2 hours ago, ArcticCrusher said:

 

Interesting read, but the author assumes advisers are outproducing advisors when they need to look at stats.  This is field where the ongoing research and correctly adapting to market conditions is the most valuable asset one can have, ie the title only gets you so far.  New fee disclosure rules this year should open some naive clients eyes to see what their returns vs fees truly are.  Perhaps the author should post his own performance over the past say 10 years as that would speak more volumes than any title or opinion he may hold. 

People really need to start taking a more active role in their financial futures instead of blindly trusting an advisor/adviser or whatever they wish to be called.  How many clients know where their FA's are personally invested and would it make sense to let someone who is  say 100% in fixed assets manage your mainly equity portfolio?  Or that the stock selections picked for you came from a recommended list?

The overwhelming majority (>95%) can't beat the indexes they are measured against, and yes there is an index for every type of investment.  There is lots of valuable online information (free and premium) out there for people to educate themselves.  Long term consistent track records are important.  

What is this new rule all about? I guess I'll look it up later, but first I'm hearing about that.... sounds like a good one though.

[ArcticCrusher]

3 hours ago, Stoney said:

What is this new rule all about? I guess I'll look it up later, but first I'm hearing about that.... sounds like a good one though.

It's called CRM2,  Client Relationship Model.   It basically discloses all fees you are paying to manage your investments.   For instance if you hold mutual funds in a normal cash account,  the trailer fees and God forbid any sales commission to purchase and sell funds will now be disclosed to you.   Those with fee based accounts who have negotiated fees (yes they are negotiated) already know the fees.