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Why bank employees with impressive but misleading titles could cost you big time

yung_dood

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'I feel duped': Why bank employees with impressive but misleading titles could cost you big time

Most financial professionals in Canada are licensed as salespeople with no fiduciary duty to clients

Erica Johnson · Investigative reporter · CBC News

Mike Black says he feels "completely betrayed" after trusting RBC employees with impressive-sounding titles to manage his life savings, only to earn far below the market average for six years.

"I worked 35 years at two jobs and saved up a considerable amount due to the fact that I didn't have a pension and would need money for retirement," said Black, who managed to put away nearly $1 million.

An RBC "financial advisor" — "advisor" with an "o" rather than an "e" is important, but more on that later — invested his money in mutual funds, but when the portfolio performed poorly for three years and Black threatened to leave the bank, he was sent to an RBC "vice-president" who would manage his money.

Black received a financial plan that claimed his nest egg would earn "about six per cent in annual interest" when invested in different mutual funds, mostly owned by RBC.

His investments actually earned less than three per cent and cost Black more than $30,000 in mutual fund fees over six years.

"How is it that you end up getting a return of this kind over this period of time, when this is to be managed by a professional and we pay such high fees?"

'All they are doing is selling what the bank wants them to sell.'
- Mike Black, RBC investor
Turns out, the RBC vice-president was actually licensed as something called a "dealing representative" — a salesperson.

"I feel duped," Black said. "My portfolio is my pension. All they are doing is selling what the bank wants them to sell."

In an email to Go Public, RBC said its "internal review found that the portfolio was appropriate based on the risks and objectives the client communicated to us."

Deceptive employee titles

A recent report by the Small Investor Protection Association found there are 121,000 people registered as financial professionals in Canada, and the vast majority are registered as dealing representatives — salespeople licensed to sell financial investments.

Only about 4,000 of these registered financial professionals have a fiduciary duty, which is a legal obligation to act in the client's best interest.

"The game today is to earn clients' trust," said Larry Elford, a former certified investment manager with RBC and lead researcher of the SIPA report. "And never let them know that you are actually a commissioned salesperson and you don't have to honour that trust."

The stakes are high, says Elford, who points out that a two per cent management fee on mutual funds typically cuts an investor's retirement fund by about half over a 35-year period.

What's in a vowel?

A common trick for misleading customers, according to Elford, is the banking industry's use of the term "financial advisor" — spelled with an "o."

He says "advisor" is an unregulated title that anyone can use, whereas the title "adviser" — spelled with an "e" — can only be used if the employee has a fiduciary responsibility to the client.

"Advisors can sell you the third, fourth, fifth or least beneficial product to you," Elford said. "They do that a great deal of the time if it makes them more commissions, or if their bank manager is telling them they need to sell more of the house-brand product."

In an email to Go Public, the Canadian Securities Administrators confirmed that it does not regulate most titles used by employees in the financial industry.

'It's completely about selling'

Many bank employees who've contacted Go Public say they act more like salespeople than anything else because of pressures from "high up" to hit revenue targets. CBC is concealing their identities to protect their jobs.

"I would say 90 per cent of my day is trying to hit targets," said a financial services representative at TD Bank.

"I have to go [meet with] my manager daily and go through each customer that's scheduled for me and see how many 'units' I can get from that customer."

'I had zero training and had to learn on the go.'
- TD financial advisor who recently quit
She says if a client has money in a savings account, she's encouraged to get them to buy TD mutual funds instead of giving financial advice she thinks would be better, such as paying down a credit card or high-interest loan.

"It's completely about selling," she said.

A TD financial advisor who quit last month says he was "thrown into the role" and expected to learn on the job.
"I had zero training and had to learn everything on the go," he said.

A CIBC financial advisor says he spends his day selling investments that may not be in his customers' interests, even though they think they're getting impartial advice.

"The term financial advisors is bank jargon for salesperson," he said. "At least in other industries they are more open about it. You sell cars? Well, you are a car salesperson. We are not advising people on anything. We are just trying to make sales."

An RBC branch manager in B.C. says tellers are now called "client advisors," and are required to get a licence to sell mutual funds.

"How do you expect a 20-year-old employee who's getting paid $12 an hour to provide advice with the title 'client advisor,' when they're really just equipped to sell? It's not fair to anybody … you're putting clients at risk."

In a statement, RBC says it "stands behind the advice and support" its "investment advisors provide to clients."

Bank employees at all levels at BMO and Scotiabank told Go Public they, too, feel their titles are misleading because they're mostly under pressure to sell bank-owned mutual funds and other products to boost the bottom line.

In previous statements to Go Public, TD, CIBC and Scotiabank said their clients are their top priority and they expect their employees to behave ethically.

'Self-regulating doesn't work very well'

Stan Buell, founder of the Small Investor Protection Association, says he's heard too many stories from people who thought a financial advisor was going to look out for their best interests.

"I've talked to hundreds and hundreds of people who've been victimized," Buell said. "And every one trusted their advisor."

He said he doubts any of the advisors were actually advisers — with an "e" and a fiduciary duty. "They're all salespeople, trained in sales."

He says banks and other financial institutions need tougher regulations.

"Self-regulating doesn't work very well," he said. "It must be an outside agency that is not composed of the industry to have the power to handle complaints, to investigate and authorize and even pay restitution for the victims of the financial institutions."

As a start, Buell would like Canada's big banks to be more transparent and call their employees salespeople, not "advisors" or other titles that suggest they're working in the customer's interest when they're actually serving their employer.

Mike Black says he took his money out of those fee-based accounts at RBC Dominion Securities and hopes for better luck with his next investment.

But his experience has left him shaken.

"I've always been very trusting, conscientious, both me and my wife. We've walked the walk. And quite frankly, I feel like it's been a hit and run."

http://www.cbc.ca/beta/news/canada/british-columbia/bank-s-deceptive-titles-put-investments-at-risk-1.4044702
 

lenny2

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Jan 18, 2012
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"Black received a financial plan that claimed his nest egg would earn "about six per cent in annual interest" when invested in different mutual funds, mostly owned by RBC."

This sounds just like my experience with a RBC rep trying to sell me on this, with the bank getting 2% in fees.
 

GPIDEAL

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Jun 27, 2010
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Thanks for posting yung_dude.

I've seen certain products sold by CIBC or TD that have performed okay (~ 5% or more).

Generally though, are you safe if the bank employee has a C.F.P. designation or similar?

I also feel that the banks have discouraged the sale of traditional GICs or Term Deposits for reasonable rates just so that you buy their mutual funds, which costs you more.
 

TeeJay

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With interest rates so low why would anyone think leaving money in a bank is a good thing is beyond me
Land speculation is best business there is these days, easily can double your money
 

FAST

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"Black received a financial plan that claimed his nest egg would earn "about six per cent in annual interest" when invested in different mutual funds, mostly owned by RBC."

This sounds just like my experience with a RBC rep trying to sell me on this, with the bank getting 2% in fees.
I think It would be illegal to state,..."his nest egg would earn "about six per cent in annual interest".

FAST
 

mmouse

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90% of the investment industry is a scam. All people need to know is to go out and buy some Vanguard index funds and they'll perform better than any shit a bank sells you.
 

TeeJay

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I think It would be illegal to state,..."his nest egg would earn "about six per cent in annual interest".

FAST
They never state that
What they do state is in the past earned 6% and expect similar returns

Then stupid investors take that as a promise and hand over cash



The one thing that baffles me is this;
Bank lends money out at 3% or less
So if he really can make 6% back why does he work there as a lowly advisor lol
 

shinenishine

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Nov 27, 2013
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This Article is another attention Grab by CBC
the fact if the matter is no one knows which way market will go
the product sold by banks like managed funds are designed to have downside protection an average investor would do amazing investing on their on when the market is going up but wouldnt know what to do in down market

and the bank doesnt get 3% or 2% a big portion goes to fund managers the rest goes to the bank... and yes most if not all Financial advisors make commission but thats the point the good ones have an interest in your portfolio to do well, because if you leave they wont make that income anymore

lol and ya i am in the banking business but its honestly sad to see articles like when most of us do everything we can to help clients get to where they need to go but article like this make us sound evil.

we advice and plan
if you dont paying us for our advice and time then invest on your own pay trading fees and be happy

and one last thing the advisor is suppose to tell you all fees before you invest if you dont like the fees there are something called index funds with much lower fees but they just mirror the market so in bad times it will go down the same % as the market does
 

Smallcock

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This is why you invest using self-directed brokerage accounts.
 

The "Bone" Ranger

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it will have a whole bunch of disclaimers including one that will say "it is an illustration" and with guarantee of said return

They never state that
What they do state is in the past earned 6% and expect similar returns

Then stupid investors take that as a promise and hand over cash



The one thing that baffles me is this;
Bank lends money out at 3% or less
So if he really can make 6% back why does he work there as a lowly advisor lol
 
Personally I don't like nor trust banks, hence my self-directed Brokerage and Tax Free Savings accounts. That's why I'm starting with a co. called World Financial Group (WFG). Once I get my Life and Mutual Funds licences I can start helping others come up with a financial strategy, educating them along the way. It's a brokerage, with no products of their own, so no bias to sell their own products like that of banks. The idea is to find the best product out there for the client, helping them achieve their financial goals and protecting their future. I'll still be doing this for some years, but need to replace it with something else down the road. Either way, I'm helping others, which is what I like to do!
 

Steve Harper

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6% average annual return less 2.5% management fee the mutual fund takes from the 6% = 3.5% growth if the market is good.

Or you could simply buy shares in BCE which pays a current dividend yield of 4.872%. It doesn't get more blue chip & safe than BCE.

As was said above, the entire mutual fund business is a scam.
 

lenny2

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Jan 18, 2012
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6% average annual return less 2.5% management fee the mutual fund takes from the 6% = 3.5% growth if the market is good.

Or you could simply buy shares in BCE which pays a current dividend yield of 4.872%. It doesn't get more blue chip & safe than BCE.

As was said above, the entire mutual fund business is a scam.
How about the "BMO Blue Chip GIC":

https://www.bmo.com/main/personal/i...bmo-progressive-gics/bmo-blue-chip-gic&#rates

Locked in for 5 years, the principal is safe, 1% is guaranteed & profits are 100% of the increase.



Personally, I think you need to have a good network and receive the right information. Otherwise don't do risky investments, you better buy that Ferrari than letting someone else get one with your money!
I opted for a Ferrari's worth of hundreds of SP sessions. Many great memories that aid my autoerotic life ;

Not too long ago when it was about $30 my bank financial wizardess suggested investing in oil now at nearly $50.
 

Ceiling Cat

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Feb 25, 2009
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I was out of country in the early 90s, when I came back to Canada the mid 90s I was 27 years old. I met with an old buddy and to catch up. He told me that his sister was made vice president of her bank branch. She was a couple of years younger than we were. She was pretty much the assistant manager of the bank branch. The banks like to give people tittles to make clients feel important. In later years I had my share of dealings with executive account managers, this is to make the broker seem more important than he actually is. The banking, investment and insurance business is full of lofty tittles.
 
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