|Not taking enough risk
|"Court finds an investor's portfolio was too heavily concentrated in preferred shares, but its low-risk strategy was appropriate"
|And it's gone
|"Tesluk, Chang and others lost their money and the benefits that flow from RESPs to a company securities regulators have repeatedly censured but continue to allow to do business."
|The cost of free trades
|"Robinhood, and the rest of the online brokerage industry, rely on what's known as payment for order flow as their profit engine in lieu of commissions."
|The soft side of planning
|"To my reading, the rise of the independent financial planner is the most significant financial event of my tenure at Morningstar. We did not anticipate this movement, but it proved crucial to our company's success. More importantly, millions of investors have benefited from this development as financial services began to work for those who purchased them, as opposed to mostly enriching those who sold them. It was a powerful and profound change."
|The salesman wasn't pleased
|"While the steak dinner pitch might not be a con game, it is a bit of a psychological dance. You attend, you eat free food and by the time the cheesecake arrives, you may feel you owe a salesperson a one-on-one meeting. Then you're on the hook. If these meals didn't catch lots of people, salespeople wouldn't keep paying for them."
|Scalability for robo-advisors
|"If this robo is able to attract greater AUM per client - $50,000, for example - we're still talking about at least 40,000 clients. I wonder if the scalability assumptions of robo firms - and the regulatory tolerance for automation - will be challenged."
|Almost 80% of day traders lose money
|"In the end, 79.5% of them lost real money. The median 12-month returns were -36.3%."
|Advisors worth their fees?
|"The advisor offers us tax advice. He coaches us on ways to keep our household costs down. We meet every quarter to re-evaluate our goals and see how we're doing. He also calms my nerves when markets go crazy."
|John Oliver: retirement plans
|"Saving for retirement means navigating a potential minefield of high fees and bad advice." [video]
|G&M broker ranking
|"This year's overall winner is Virtual Brokers. VB has reclaimed the top spot from Qtrade Investor, now sharing second place with hard-charging Questrade. In third is a name you haven't seen for a while in the upper echelon of this ranking. It's TD Direct Investing, which has introduced a strikingly good new client website. The pressure's now on the other bank-owned firms to catch up."
|Retail financial advice
|"Using unique data on Canadian households, we assess the impact of financial advisors on their clients' portfolios. We find that advisors induce their clients to take more risk, thereby raising expected returns. On the other hand, we find limited evidence of customization: advisors direct clients into similar portfolios independent of their clients' risk preferences and stage in the life cycle. An advisor's own portfolio is a good predictor of the client's portfolio even after controlling for the client's characteristics. This one-size-fits-all advice does not come cheap. The average client pays more than 2.7% each year in fees and thus gives up all of the equity premium gained through increased risk-taking."
|Financial advice for the not so rich
|"For a couple of years now, a number of entrepreneurs have been racing to solve the same problem: the financial services industry's persistent inability to provide personalized advice and appropriate investments at a reasonable price to customers who are not rich."
|"Norbert's gambit remains the least expensive way to convert Canadian and US dollars at a discount brokerage. For investors looking to buy US-listed ETFs, learning this technique can save hundreds of dollars by sidestepping the wide currency spreads charged by brokerages."
|The best brokers
|"The best reason to be a do-it-yourself investor is to cut costs, and the online broker that helps you do that best is Virtual Brokers. Cost is a huge category in the 15th annual Globe and Mail ranking of online brokers, and VB aces it."
|The problem of small accounts
|"Good advice costs money. Really good advice costs a lot of money, and is worth it, if you have enough money to spread the cost over. But when you have a small account, you have a problem in getting advice."
|Wall Street hates you
|"Don't buy what someone wants to sell you. Buy what you have researched."
|Virtual Brokers becomes ETF leader
|"I think it is fair to say that Virtual Brokers now offers the most compelling suite of services to ETF investors. I have often discouraged people with small accounts from using ETFs because the trading costs can make them far less efficient than index mutual funds. But with VB, you can now add new money to your portfolio every week or every month at no cost: you'd only pay commissions once or twice a year if it becomes necessary to trim a holding or two while rebalancing."
|RBC Direct Investing disappoints
|"It came to our attention recently that earlier this year, RBC's discount brokerage, RBC Direct Investing, ceased to offer funds sponsored by Leith Wheeler, Mawer and Steadyhand. The move was described by RBC as a "business decision," and we assume this reflects the fact that the funds offered by these firms do not pay trailers, and thus RBC does not receive any revenue from their sale. If this is indeed the reason behind the decision, it is not a strong one."
|A guide to private placement due diligence
|"Because I'm in the business of helping people, I thought I'd offer up my own 3-step guide for stockbrokers when conducting due diligence on private placements: Step 1: Make sure you have a copy of the Private Placement Memorandum (also referred to as the PPM). You're going to want to light this PPM on fire and drop it into a Hazmat dumpster at least five miles from your office. Step 2: Tell the banker/firm owner/branch manager or whoever brought it to you to go f' himself. Step 3: Head over to Dunkin Donuts, get yourself a Coffee Coolatta. Yes, I know they've got hundreds of calories - but you're worth it. You've done some good this day."
|What Bay Street doesn't want you to hear
|"A substantial number of do-it-yourself investors are paying for financial advice they are not getting and never will. That's what can happen when you buy mutual funds from an online broker. While you typically pay nothing to buy and sell your funds, the cost of owning them can be identical to what is paid by investors who have advisers. There's almost a conspiracy of silence on this matter in the investment industry and it results from the fact that the status quo serves brokers and fund companies quite well."
|A milestone in low-cost investing
|"The golden investing rule of controlling fees to generate bigger returns never makes more sense than it does at challenging times like these for financial markets. So, cost-conscious investors, take note of the introduction of commission-free ETF trading at online brokerage Scotia iTrade. There may not be a cheaper way to invest anywhere."
|Asking the right and wrong questions
|"From a behavioral economics point of view, the field of financial advice is quite strange and not very useful. For the most part, professional financial services rely on clients' answers to two questions: How much of your current salary will you need in retirement? What is your risk attitude on a seven-point scale? From my perspective, these are remarkably useless questions"
|A new way to slice the pie
|"In theory, fee-based accounts give advisers a transparent, above-board way to answer the question of how much they charge for their services. Instead of paying commissions buried in the cost of investment products, clients pay annual fees equal to a percentage of the value of their account plus any costs associated with the investments they hold."
|Love the downgrade
|"It would appear that as long as they spell your company's name right,upgrades and downgrades are both good news for your stock."
|Your Adviser Is Scared to Set You Straight
|"One danger is that if you voice a strong opinion, your adviser might not give you a second opinion. He might merely echo your own, making you think he is smart because he agrees with you - and clearing the path of least resistance to his next commission. Sometimes, acting like a sheep just pays better."
|Overoptimistic for a generation
|"For the past quarter century, equity analysts' earnings-growth estimates have been almost 100% too high."
|The yes-man problem
|"The problem: Financial planners are yes-men and -women, asserts a report co-authored by Sendhil Mullainathan, a Harvard professor and top behavioral economist. Most planners, his report finds, reinforce our bad investment behaviors instead of fixing them. And the problem, he says, may be harder to solve than the fee issue."
|Technology not always a godsend
|"If you're a client of the online brokerage Scotia iTrade, you'll have an idea of what I'm driving at in warning about technology risk. Scotia iTrade is what Bank of Nova Scotia renamed E*Trade Canada after scooping it up back in 2008. Last month, Scotiabank set about merging iTrade's back office record-keeping operation with the bank's own system. Complaints to this column from iTrade customers began rolling in on Dec. 11 and they've continued right into the new year."
|Do your legwork before hiring an adviser
|"There's a kind of investment risk that is statistically very rare, but crushing if it happens to you. It's called adviser risk and, thanks to coverage of the scheme allegedly perpetrated by Montreal financial adviser Earl Jones, we have a horrifying view of what it means. As much as $30-million to $50-million belonging to Mr. Jones's clients, many of them seniors, has allegedly disappeared. Some victims are looking at having to sell their homes, while others have had to rely on food banks to get by."
|Questrade rebating mutual fund trailer fees
|"Questrade says its Mutual Fund Maximizer makes it the only direct access brokerage to rebate this fee -- representing up to 1% or more of the value of their mutual fund investments -- back to its clients."
|Beware of fees
|"Insult is about to be added to the injury done to your investment portfolios in the past year. With the value of your account falling, you may find yourself paying higher commissions to trade stocks, as well as miscellaneous fees from which you were previously exempt. Not convinced on the merits of putting money into the markets right now, with share prices knocked way off their peaks of last summer? Now you have the additional motivation of being able to avoid parasitic fees by reinflating your depleted account."
|Qtrade retains crown
|"Now to the question of which brokers are best. Qtrade Investor, a small firm out of Vancouver, has taken top spot for the third straight year, while BMO InvestorLine, E*Trade Canada and TD Waterhouse also scored well. Qtrade is an example of a broker that does almost everything well. Whether it's keeping costs low, providing tools that help investors make smart decisions or offering a sturdy trading platform, Qtrade has it covered."
|Scotiabank to buy E*TRADE Canada
|"Scotiabank will purchase E(*)TRADE Canada for USD$442 million (approximately C$444 million), subject to regulatory approvals. The completion of today's announcement will double Scotiabank's footprint in the Canadian online investing market." [There goes another independent broker.]
|London 'cityboy' unmasks world of analysts
|"As a utilities analyst at Dresdner Kleinwort, Geraint Anderson was advising clients how to invest. At the same time, through an anonymous London newspaper column, he was telling readers how analysts wrote 'utter gibberish.'"
|Fee-only must mean just that
|"Canadian financial planners should eliminate the ambiguity by scrapping the phrase "fee-only" when charging fees computed as a percentage of client assets. Instead, they should use the term "asset-based," which is far less confusing for clients."
|Find the right broker for you
|"Your next stop is the Stingy Investor website. (Go to www.ndir.com and search for Canadian discount brokers). It's run by Norm Rothery, chief investment strategist at Dan Hallett & Associates Inc. Here you can find up-to-date comparisons of the fees and commissions charged by 15 Canadian online brokerages (as well as phone numbers and email addresses). What you pay usually depends on how many trades you make per quarter or year, how many shares you buy at a time and how many dollars you have in assets at the firm."
|Beware: A 'safety net' full of holes
|"Regardless of what they're called or the advantages they claim to offer, these products have two things in common: very high commissions for your adviser and, thanks to fees averaging about 2% to 3% a year, very low returns for you. And you often have to pay a surrender charge, or exit fee, of 6% or more if you want to withdraw the money in the first six to eight years. Another feature you'll commonly find with these safety nets is confounding complexity. I've had plenty of clients who signed disclosure forms stating that they had read and understood the 473-page policy, yet they still had no idea what they were buying."
|"Individual investors continue to flock to online investing as a low-cost alternative to full-service brokerage accounts. As of December, 2007, Canadians had $179-billion invested in online or discount brokerage accounts, according to Investor Economics Inc. That's no trivial amount, although it's still dwarfed by the $720-billion stashed in full-service accounts, says senior consultant Guy Armstrong. "We're still predominantly an advice-oriented society.""
|Online brokers: Sizing up your RRSP options
|"Investors of all types can benefit from an online broker, be they conservative types who prefer bonds and GICs, aggressive stock traders or middle-of-the road types who want stocks, bonds and mutual funds. The challenge is to find the broker that best fits your needs. To that end, Portfolio Strategy has evaluated 13 online brokers to find the best choices in six areas relevant to RRSP investing."
|Online upstart stands out
|"An upstart online brokerage has bested the bank-owned competition in addressing one of the biggest complaints investors have about stock trading. Questrade Inc. will announce on Monday that clients can hold U.S. dollars in their registered retirement accounts. The industry norm is to allow only Canadian dollars in registered accounts, which means costly currency conversion charges are often unavoidable for investors who buy and sell shares listed on U.S. exchanges."
|Qtrade wins again
|"Investors have the online brokerage business right where they want it. To start with, stock-trading commissions are plunging. After years of being stuck in the $24-to-$29 range, more and more brokers are charging just under $10 as long as your accounts have at least $50,000 to $100,000 in total assets. At the same time, these firms are giving clients more for their money with better tools for finding investments and managing their accounts."
|TD Ameritrade suffers database breach
|"TD Ameritrade Holding Corp. said Friday one of its databases was hacked and contact information for more than 6.3 million customers was stolen. A spokeswoman for the Omaha-based brokerage firm said more sensitive information in the same database, including Social Security numbers and account data, does not appear to have been taken."
|The high price of free insurance
|"Typically, those who sell policies receive about 20% to 30% of the death benefit. For a $1 million policy belonging to someone with a life expectancy of seven years, a purchaser might pay $250,000, says Adam Balinsky, a partner at Baker & McKenzie in Toronto. But after paying various fees to middlemen that buy policies, the seller would be likely to take home only about $150,000, he calculates. From those proceeds, the seller would have to repay the loan plus various lender fees and interest of 12% to 18%. In the end, the insured might only net about $42,000, Balinsky figures."
|A buyer's guide to online brokers
|"This year's Globe and Mail survey of online brokers for RRSP investing includes 15 firms and it focuses strictly on services delivered over the Internet. All the usual players are here, from BMO InvestorLine to TD Waterhouse, but there are three newcomers as well. DisnatDirect, Questrade and TradeFreedom mainly target aggressive stock traders, but they're increasingly reaching out to more mainstream investors who focus on stocks."
|Saving Mom from annuity pitches
|"Have you ever heard the expression "to a man with a hammer everything looks like a nail"? Well, some financial advisers who make a good part of their living selling annuities see variable annuities as the answer to virtually every client's financial needs. Looking for tax-sheltered returns? A variable annuity will do the trick! Retirement investment? Can't beat a variable annuity! Looking for safety and guarantees? I've got just what you need - a variable annuity!"
|E*Trade raises the stakes with high-rate offering
|"E*Trade is fighting the dominant, bank-owned discount brokers for market share in Canada and it already slashed the cost of trading stocks to as low as $9.99, compared to as much as $29 elsewhere. Now, it's offering a solution to a quandary faced by virtually all investors: How do you squeeze a decent return from the cash in your brokerage account in a low interest rate environment? E*Trade will announce a new offering today called the Cash Optimizer Investment Account, which carries a rate of 4.15 per cent for Canadian-dollar balances and 4.75 for U.S. dollars. There are no fees of any kind or any minimum deposit."
|The defiant one
|"The ex-employee who tried to bring down Saskatoon financial advisor Brian Mallard died two years ago. But Mallard's fight for his reputation didn't."
|Rob's on-line brokerage rankings
|"Costs are the most important factor in this eighth edition of the Globe's broker ranking, and the reason is that they're uppermost in the mind of do-it-yourself investors. In a survey conducted recently on the Globeinvestor.com website, a little more than one in three of the 1,641 participants ranked cheap commissions and fees as the top attribute of an on-line broker. No other attribute was even close."
|Clients deserve to know annual rate of return
|"A Toronto financial consultant is leading a campaign to have investment companies fix a ridiculous deficiency in the way they show clients how much money they're making or losing."
|The time's come for full disclosure on return rates
|"Certainly, the vast majority of firms do not disclose to clients how much money their portfolios are making or losing each year. This is scandalous when you think about it and yet another example of how the investment world sometimes treats its clients like infants."
|The study of the decade
|"Over the next few years, you will be hearing a great deal about a ground-breaking new study that is just now starting to receive nationwide attention. The only notice of it that I have seen in the public media just appeared in a popular money magazine: "A new study compares the cost and performance of more than 4,000 mutual funds--some sold by brokers, some selected by people on their own--from 1996 to 2002. The people won." In other words, do-it-yourselfers outperform financial advisors."
|Assessing the costs and benefits of brokers
|"Exploring these dimensions, we do not find that brokers deliver substantial tangible benefits. In short, while brokerage customers are directed toward funds that are harder to find and evaluate, brokerage customers pay substantially higher fees and buy funds that have lower risk-adjusted returns than directly-placed funds. Further, brokered funds exhibit no better skill at aggregate-level asset allocation than funds sold through the direct channel. This analysis implies that any benefits that exist must be found along less tangible dimensions."
|Active traders: On-line brokers want you
|"Hard-trading stock jocks are suddenly getting the VIP treatment from the big on-line brokerage firms. At least five major brokers have in the past few months introduced cut-rate commissions for active traders, a term that is commonly defined as placing at least 30 buy or sell orders per quarter. These discounts can take regular commissions of as much as $29 per trade and reduce them to as little as $9.95, which means they offer substantial savings."
|PPN offerings are sorely lacking
|"What a sweet deal the financial industry has going in its star product of the moment, principal-protected notes (PPNs). There are estimates that as much as $7-billion are invested in PPNs, double the level of two years ago. And yet, these notes are as loosely supervised as any investing product out there. Securities regulators need to get on this, fast."
|DIY investors can save BIG with discounters
|"Rule One if you're a do-it-yourself investor who uses mutual funds is to never pay a cent in purchase commissions."
|E*Trade slashes its fees in bid to shake up market
|"Discount broker E*Trade Canada is to announce today that its minimum commission for trading stocks on the Internet will fall 26 per cent effective Jan. 10. The new rates are to be $19.99 for mainstream investors and $9.99 for active traders, down from E*Trade's current top fee of $26.99 and as much as $29.95 at other firms."
|Always evolving BMO wins again
|"BMO InvestorLine is just such a broker and that's why it came out on top in The Globe and Mail's annual on-line brokerage rating for the fourth consecutive year. Other top brokers this year are E*Trade Canada and TD Waterhouse."
|Shifting patterns in the load universe
|"A further issue, Investor Economics says, is that, while de facto advisors are going fee-based, they have not embraced the unbundling of fees. "Although unbundling fees is economically neutral from a client and advisor perspective," Insight says that several of the industry people interviewed for the report "suggested that the idea of sending a bill to clients for services rendered remains an unappealing option for many advisors.""
|The sins of the advisers when it came to Portus
|"Three commandments dictate the responsibilities that investment advisers owe their clients and at least two of them were trampled when investors were put into Portus hedge fund products."
|Advisers can have knack for making grass look greener
|"The insidious thing about portfolio transformation is that you have little or no recourse if things work out badly. Just try going to a firm's branch manager and complaining that your perfectly fine portfolio of blue chips was broken up to invest in a lame wrap account. The party line will be that such a move is sound investing because the wrap offers broader diversification and professional management. Compliance departments at firms and investing industry ombudsman offices won't disagree because, in theory, wraps and pooled funds do offer benefits. In real life, these benefits are sometimes illusory or tangible only to the adviser and her firm, which may pocket more in fees."
|Revenge for the small-portfolio investor
|"Suggested solution for small accounts looking to set up a registered retirement savings plan: Open a self-directed RRSP at an on-line broker. If you have the time, the inclination and the knowledge to drive your own retirement savings plan, then an on-line broker can be a great vehicle. Or not. Open an account at the wrong on-line broker and you may feel as used and abused as a client of an indifferent adviser."
|"It's a bit scandalous how bad most investing account statements are. Too often, they just throw some numbers at you that illuminate your situation only after you hunt down previous statements or grab a calculator to exercise your flabby math muscles."
|Understanding your account statement
|"It's not always easy to understand all the information on your investment account statement. So we've teamed up with Dalbar, a research firm specializing in account statements, to develop this program to help you"
|To sell or advise?
|"What do you suppose is the primary role of a financial advisor? Would it come as a surprise to you to know that mot financial advisors earn their living by selling financial products that the prevailing culture in the financial advice business is more like that of a real estate agent than that of an accountant? Real estate agents make money by selling whereas accountants make money by advising."
|P&C industry agrees to full compensation disclosure
|"Canada's property and casualty (P&C) insurance industry has agreed to provide full disclosure of how brokers are compensated, beginning in the new year. But it's too early to say if the life and health side will take similar steps, according to an industry spokesperson."
|Insurers getting dragged out of disclosure stone age
|"Badger someone in the mutual fund industry about fees and disclosure and you'll often hear muttering along the lines of "yeah, but you should really should take a look at the insurance business." Too true. Compared with insurance, mutual funds have the transparency of freshly Windexed glass."
|Why Wall Street hates the "S" word
|"These realities create what might be described as Pascal's Wager for Brokerage Analysts, a risk/reward equation that, when everyone else is positive, makes it risky to be negative:"
|Discount brokers are good for trading stocks, not bonds
|"Mr. Brownridge believes spreads are so high at discount brokers that investors are effectively paying a similar cost to the one charged on bond mutual funds through their management expense ratios. Ironically, the type of investors who buy bonds directly are the sort of people who fancy themselves too savvy to buy bond funds."
|Ethics course has brokers on right track
|"It's easy to dismiss this initiative as mere cosmetics, but that would be unfair. Applied Ethics in the Securities Industry, as the CPH course module is enticingly titled, has an unambiguous, do-the-right-thing message that the financial sector's rookies would do well to absorb."
|CFP designation is consumer's first line of defence
|"As absurd as it sounds, anyone outside the province of Quebec can call themselves a financial planner without any qualifications. The Certified Financial Planner designation is your first line of defence against the amateurs out there."
|OSC highlights questionable scholarship plan sales tactics
|"A recent Ontario Securities Commission report highlighted some very disturbing findings about how scholarship plans are sold in several provinces across Canada."
|A greedy investment advisor may be taking advantage
|"What are the lessons? First, know enough to trust. In other words, to ensure your parent or you are not being taken advantage of by an unscrupulous broker, you must get yourself educated about investments and learn about the pressures advisors are under to generate commissions."
|The trailer truth
|"Furthermore, if advisors are allowed to use misleading terminology to describe their services, I wonder what would happen if we were to re-brand trailers in the opposite direction - perhaps as "independence compromising bribes". Imagine having a financial advisor come up to you and say "I run a bribe-based practice". That would not only add to the frankness of the ensuing discussion, it would also explode the myth that most financial advisors are independent. In fact, most advisors fail to recommend many of the best fund companies' products because they can't bear to hand their clients a bill. In spite of this, they sanctimoniously insist they are independent - even though embedded trailers effectively limit the products they recommend. This arrangement allows some advisors to actually suggest that their financial advice is free, which is patently false."
|Two solitudes over disclosure
|"Why are fund companies and securities dealers so at odds with investors?"
|One man's quest for redress ends happily
|"Justice for people who were burned by their investment advisers is such a rare commodity that it's worth celebrating even a single victory. So, let's take a look at the story of Ernest Wotton and the cheque for $52,353 that his onetime brokerage firm wrote him not too long ago."
|Advisers should stop whining about DIY investing
|"Do-it-yourself investors are naive, uninformed, overconfident and, above all, a danger to themselves. These are facts. Just ask a financial adviser. We've had some real insight into the thinking of some advisers over the past couple of weeks thanks to a controversy over whether self-directed investors should have access to low-cost mutual funds."
|Do advisors fear F class units?
|"If pressure from advisors was at least partially to blame for E&P's and AIM-Trimark's withdrawal from E*Trade's initiative, it's likely that those advisors aren't truly confident in the value of their advice - a sad statement for any professional."
|Loss of AIM mars E*Trade's cheaper investing bid
|"A breakthrough in low-cost investing has fizzled because of a mutual fund company's trepidations."
|Where to find hot deals when picking a stockbroker
|"Attention, Kmart investors. Value investing is our theme today. Not the typical value style, which is to find undervalued stocks. Instead, we're searching for the best values in stock-trading commissions. The cheapest of the cheap, if you will."
|All the major players should join F-class parade
|"Right now, investors who want to buy F-class funds are limited to E*Trade and ASL Direct, a small on-line fund dealer that's been around for about four years. Other on-line brokers are now looking at selling F-class funds and the major fund companies that have F-class funds will have to decide whether to accommodate them. If you want to help things along, contact your on-line broker and any fund companies you deal with to say you'd like to be able to buy F-class funds."
|E*TRADE Canada offers access to lower MER mutual funds
|"Online discount brokerage E*TRADE Canada today announced the launch of the FundPlus Program, a new service that provides investors with access to a special class of mutual funds with lower management expense ratio."
|Financial literacy for Canadians
|"Unfortunately, too much of the industry still revolves around consumers who want an advisor who can foresee the future and advisors who claim to be able to identify hot sectors, stocks and funds. No reputable profession would ever made such ridiculous claims."
|Why punish early adopters?
|"From my perspective, the eradication of embedded compensation can't happen fast enough. It is only when it becomes totally impossible to bilk the system that consumers can feel protected from advisors who "double dip" or invest money in money funds at "no load" while suggesting the funds in question are "free". We've already established that advisors need to be paid. It should be obvious, therefore, that advice is never "free". Sadly, too many consumers would rather avoid dealing with that harsh reality than work an advisor who has the decency to force them to come to terms with it."
|Time to tackle the bias
|"It's all very well to shift the regulatory focus from trades to advice and to beef up disclosure, but until the compensation system is product-neutral, clients can never be certain that advisors are truly focused on their best interests."
|The ins and outs of trading by telephone
|"The second-class citizens among discount brokerage clients are those who trade by telephone. While minimum on-line stock trading commissions go for anywhere from $24 to $29.95, a comparable trade done over the phone with a live representative might typically cost $43. Phone clients also get worse service. When markets are on a tear, clients who want to talk to a rep are more likely to face delays than those who place orders on-line."
|An on-line broker for you
|"Some brokers are better for certain types of investors, though. That's why this year's version of Globe Investor's annual on-line brokerage rating for RRSPs sets out three different investor profiles -- the neophyte, the established investor and the active investor -- and then outlines the best and worst choices for each."
|Getting their money back
|"Regulators are taking steps to compensate Canadians cheated by rogue brokers"
|Now's the time to chat up your adviser
|"This year, plan to spend a little time with your adviser. When he or she recommends a fund for your RRSP, offer up these 10 questions as a conversation starter. Remember, you're not challenging your adviser so much as you're engaging him or her to show you care."
|ING redefining funds the same way it did savings accounts
|"Where ING differs is in the fact that it has created a true zero-cost model, while most of these other dealers have fee loopholes all over the place."
|SEC finds widespread fund abuses
|"Securities regulators said Tuesday that they've found widespread abuses at 13 out of 15 Wall Street brokerages probed in the sale of mutual fund shares."
|Sadly, lawsuits are best remedy for investors
|"In Canada today, protections for individuals preyed on by the investing industry are as feeble and inadequate as I've seen in five years of writing this column."
|Research looks much as it used to
|"Analysts obviously believe there's good potential for some energy and gold, which is sort of a contrarian call when you look at what these sectors have done lately. Then again, it's possible that these sectors are likely to generate lots of investment banking and underwriting business."
|The greed disease
|"The crux of his book was that work on Wall Street -- and more broadly in the financial services industry -- was different from other work because it was only about money. There was no product, no goal. There was nothing but the production of endless amounts of money. It tended to make a mess of people's lives."
|Bearish Merrill strategist under fire
|"Amid a rising tide of complaints, Merrill Lynch & Co.'s chief U.S. strategist, Richard Bernstein, is seeking to defend his bearish view of the stock market from investors who believe he is hopelessly wrong."
|The value of a fee-based advisory relationship
|"Instinctively, well-heeled people are far more favourably inclined to work on a fee basis because they understand the business model and how it both aligns interests and embeds transparency. Quite apart from the ethical perspective, there are sound tax reasons for working on a fee basis, too."
|Nobody sues in a bull market
|"'Rogue clients' try to blame their advisor for their losses "People don't sue when they're making money." That's a direct quote from a lawyer who specializes in defending investment advisors from "rogue clients.""
|Clients can be greedy too
|"Some clients may deliberately misrepresent their investment experience and risk tolerance to make aggressive gambles on the market. If the bet doesn't go their way, they sue the advisor. More often than not, advisors find it cheaper to settle, since errors and omission insurance will pay most of the bill."
|Time to chuck commissions?
|" A growing trend toward fee-based financial advice has both benefits and pitfalls for investors"
|The bad apple data base
|"IDA's online search helps investors, deters violators. It just got easier for investors to check out whether their financial advisors or their firms are 'bad apples.'"
|Industry muzzles its victims
|"Gag orders keep bad advisors' names out of the press. One of the frustrations with this job is some of the most potentially instructive stories can't be made public. Since the stock bubble of 1999 burst, many tales of investor abuse involving leveraged loans have come to my attention."
|Fee rise says watch out for hidden RRSP costs
|"You're not just buying an investment when you put Royal Bank of Canada GICs and mutual funds into your registered retirement savings plan. You're also buying a relationship that you can't get out of without paying $50."
|The professional financial advisor
|"Perhaps the biggest sacred cow in the industry right now is the notion of independence. Since virtually all advisors receive their compensation through some form of embedded compensation, it could be argued that virtually no one in the industry (please don't call it a profession yet) is truly independent. Arguments about proprietary vs. non-proprietary funds are just plain silly. The more meaningful distinction is between embedded compensation and unbundled compensation. It is only through the latter that consumers can feel confident that the recommendations being made are truly in their own best interests. This means that commissions and trailing commissions have to go- and the sooner the better."
|Time to unhitch that trailer
|"Leemhuis's inspiration was to replace the floating expense of $1,000 per annum with the fixed $360/year subscription fee. In the above example, the $1,000 trailer fee is rebated to the client. On a net basis, the client is ahead $640. Since the average portfolio at ASL is $250,000, the savings are often more than that."
|Canadians in the dark?
|"Financial consumers have a very weak understanding of the function of planners, their qualifications and how they are regulated, a survey for the Financial Planners Standards Council reveals."
|Make your advisor squirm
|"For investors and the salespeople who [self-] serve them, the book is the biggest expos of Canada's mutual fund industry since Daniel Stoffman's The Money Machine. It's the book Glorianne Stromberg might have written if she'd been an advisor instead of a lawyer and regulator."
|Barrage of takeovers marks start of new era
|"When the banks bought brokerage houses, the bargains came to those who bought first; the last ones in paid the highest prices. However, this next round of convergence in the financial services industry will probably be driven by the desperation of the sellers. Patience, in this game, may well be rewarded."
|Making the leap
|"Although no longer a new concept, the merits of going fee-based are still being hotly debated within the financial advisory business. One thing is clear though: the transition can be a challenge and not every advisor is going to have what it takes to make the leap."
|Why doesn't CIBC ban coffee too?
|"CIBC World Markets is banning e-mail between its analysts and investment bankers, and other brokerage firms are said to be considering similar moves to shore up the "Chinese wall" between the two departments. But why stop there? Why not give analysts their own washrooms, so they don't run into bankers accidentally? Better yet, segregate the two in separate buildings, monitor their telephone calls, and comb the in-house baseball league for any illicit relationships."
|Who is your broker working for?
|"When your stockbroker recommends a mutual fund for you to buy, does he or she have a vested interest in that advice? One of the dirty little secrets of the business is that brokers do indeed. Some mutual funds pay them higher commissions than others do for selling their products."
|3 insurers quietly end a brokerage policy
|"So, for the insurance companies, it has been a long free ride. Yet suddenly they have concluded that the ride is too risky, in part because the worst-case outcome, though unlikely, would be catastrophic."
|Bequeathing your assets to your broker
|"A hoary peice of stockbroker lore has a young broker asking a senior partner at the firm about his proudest accomplishment. The reply: 'Over the years I've gradually transferred the assets of my clients to my own name.'"
|You're footing the bill for fund trailer fees
|"Hope you're getting great service from the financial adviser or dealer that sold you your mutual funds. After all, you're paying for it."
|Another take on wrap accounts
|"Dan Hallett, president of Windsor-based Dan Hallett & Associates Inc., says assessing the worthiness of wrap programs depends on how much is invested, advisor flexibility on fees, and the program sponsor's co-operation in allowing such flexibility."
|A new breed of planner evolving
|"Although planners have seen the assets on their books dwindle in the past few years, the number of clients they serve in order to maintain that shrinking revenue has remained the same. Despite the drop in assets, the average client base is more or less unchanged from last year at slightly more than 300. This also contrasts sharply with 2000, when the average planner had only 223 clients, reflecting the influx of newcomers to the business."
|Most brokerage stock picks underperform S&P500
|"The study, which analyzed data from quarterly surveys prepared by Zacks Investment Research and published in The Wall Street Journal, found that the average compounded quarterly return for recommended stocks was 2.17%, with the S&P 500 performing marginally better at 2.26%. The study also found that the variability of recommended stock returns is greater than the S&P 500."
|Financial advice: the sacred trust
|"It should go without saying that the advice dispensed should be in the best interests of the client. After all, if a customer is paying for advice through stock commissions or mutual fund trailer fees, he should at least be receiving top notch, truly independent advice.Sadly, however, this utopian state of affairs is a pipe dream in Canada. Too often, financial advice is seen as the ticket to building the retirement of the advisors rather than the retirement of his or her clients. Worse, with many products and services available today, what pays the advisor best is often not the optimum product for the customer."
|Sales pitch disguised as good advice
|"You don't pay financial advisors for their advice, you pay for the execution of their advice. Watch for these red flags that may really be a sales pitch disguised as advice"
|Putting the Pump in 'Pump and Dump'
|"Here's a chart showing the 35 stocks that regulators allege were the subject of deceptive research, and the firms that peddled the research on those stocks to unsuspecting investors. Also included is an example of the kind of emails regulators used to build their case against each firm. These and other emails are expected to provide ammunition for disgruntled investors in arbitration claims and class-action lawsuits."
|Be aware of the role Of Wall Street's middleman
|"There are no factories on Wall Street. But you will find a whole bunch of overeager middlemen."
|Readers cheer honest advisor
|"Last week's column on Stan, the advisor who quit a big bank in disgust, sparked dozens of queries from readers wanting to use his services or those of someone similar."
|"Oh poor investor, beware: If the taxman doesn't take your money and run, unscrupulous financial advisers will."
|Advisor quits big bank in disgust
|"But increasingly the firm is sending the message that making money for clients comes second to making money from clients..."
|Fair compensation, yes, but for what advice?
|"My view, shared by many experts who don't have a financial stake in the issue, is that there's a good no-load alternative to any load fund. Why pay the load if you can go directly to a fund company and invest without it?"
|Financial advisers need to take a little advice
|"After all that's gone on in the financial services industry recently, it sometimes seems that the best course of action would be to declare ethical bankruptcy and start over. Too extreme? Well, there's one small corner of the industry that is thinking somewhat along these lines."
|BMO InvestorLine top pick among on-line RRSP brokers
|" The on-line brokerage world has become decidedly less friendly to the smallest of small investors this RRSP season. With less than $5,000 in your account, some brokers don't want you for a customer. With less than $15,000, you'll pay annual administration fees of as much as $100 at five of the 12 firms surveyed in this year's Globe and Mail ranking of on-line brokers for RRSP investing."
|CIBC World Markets' dealings a cautionary tale
|"If you're a retail investor doing business with a big Bay Street firm, pay close attention to CIBC World Markets'troubles with the Ontario Securities Commission. There are unseen perils in dealing with the bank-owned brokerages and they're pretty much all accounted for in this sorry chapter."
|A sign of the times
|"The basic marriage of proprietary manufacturing firms with objective, independent distribution arms - the dominant model in the business - is troubling at first glance. How are clients to know if they're receiving purely independent advice? Even if the in-house fund is a legitimate choice for a given client, how can he or she trust the recommendation when there is a powerful incentive for the advisor to push the house funds?"
|"The financial planning profession is a puzzling sea of acronyms with a deluge of designations contending for the public's attention. And there's no solution in sight."
|Advisers' critiques take aim at their less-involved peers
|"Ms. Gaudreault is a 34-year-old business owner who is unhappy with the level of service she gets from her financial adviser. Though her portfolio and income are measured in six figures, her adviser has shown no apparent interest in her beyond setting up a portfolio of stocks and mutual funds. Her case, featured recently in this column, prompted numerous e-mails from financial advisers."
|Don't get caught in a one-sided deal with your adviser
|"Annie Gaudreault is 34, owns her own company and has a salary and investment portfolio that run to six figures each. In other words, she's an appealing client for a financial adviser to have. Except her own adviser, that is. Ms. Gaudreault says she doesn't feel appreciated by this guy."
|Deadwood advisers: Take heed!
|"One benefit of a bear market is that it helps clean some of the deadwood from the financial advice profession."
|Beating the high cost of trading-account inactivity
|"Brokerages have been levying inactivity fees on stagnant accounts with small balances for more than two years now to recoup the cost of managing them. In recent weeks, firms such as Charles Schwab are raising the cost of holding pat, giving individual investors another reason to fear those monthly statements."
|"When the Internet bubble burst in March 2000, unlucky investors watched more than $3 trillion of their money disappear. What spurred the incredible dot-com bull run on Wall Street? Was the public blinded by dreams of small fortunes and easy living or did the nation's investment banks manipulate the IPO market and exploit public trust?"
|Ten things your financial planner won't tell you
|"The majority of financial planners work on commission, which doesn't make them bad people but can make for bad financial planning. When Irvine, Calif.-based CFP Scott Dauenhauer worked as an adviser at a few big-name brokerage firms during the '90s, he says he was constantly being pushed into selling the firm's proprietary "
|Greed and glory on Bay St.
|"Holoday had swindled millions of dollars from clients, friends and relatives during a three-year romp. Police called it one of the biggest known frauds involving an individual broker in Canadian history."
|Hiring an advisor
|The Motley Fools have posted a useful guide to finding a financial advisor. It covers many of the basics for those who are just starting out or those who want better advice.