Michael James, inspired me to write another rant/commentary on the financial industry. He wrote about Mouths to Feed in the Financial Industry and it reminded me of a very funny monologue by Chris Rock: Bigger and Blacker (Amazon Link) about how Fathers don’t ask for much in life.

What does daddy get for his hard work? The big piece of chicken at dinner! My mamma would kill us if one of us ate the big piece of chicken by accident!

Daddy's piece of chicken

That is a BIG piece of Chicken

What does this have to do with the Financial System? Everybody in the financial system thinks they are Daddy, they all want the big piece of chicken.

  • Mutual Fund managers want you to pay the front-end, back-end and high MER fees because they are doing that much work to invest for you. That is a whole chicken, not just part of it.
  • Banks think they are the Daddy, just for taking care of your money. There are banks in Europe giving negative interest on your money (the money shrinks if you leave it in the bank).
  • Any Cell Phone Company (in Canada) is your Daddy, how much do you think their service really costs, but they are making sure you get quality service.
  • Internet Service Providers are plumbing, but they want a big piece of Chicken for the way they count your packets (and charge you if you use too many)

Let Daddy have that big financial piece of chicken? No way! They get enough, without taking the big piece of chicken too!

 Image courtesy of piyato. at FreeDigitalPhotos.net

 

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Debt Cash Grabs and Your Bank

A while ago, Gail Vaz-Oxlade put out a simple Facebook post that blew my mind.

I had heard this could happen, but evidently it happens a great deal, when folks build up large debts, or get too delinquent with their debts. The terms of your banking agreements make this all legitimate (so read them over closely to see what other interesting things your bank can do, I am sure there are others), but it does seem interesting that banks want you to consolidate your banking in one bank, and they will entice you to do this with great “deals” on things.

Customer Retention

Don’t put all your eggs in this one mousetrap

Does this mean you should go out and diversify your assets and your debts so that they are at least arm’s length away from each other? Might not be a bad idea, if you are the kind of person that builds up large personal debt loads and is very likely not to pay those debts back (or has a tardiness streak in you), but then again, if you were that kind of person, would you think of this?

It seems there are folks who try to game the system, and will bounce around from bank to bank attempting to stay one step ahead of debtors prison (or the bill collectors), but I haven’t met many of those folks. Is your bank suddenly garnishing your money a real concern? Not for most folks, but it is something you should keep in mind, just like if you buy your lottery tickets with a credit card, it is treated like a cash advance.

File this one in your TIL file (Today I Learned).

 

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Is Your Toilet Flushing Hot Water ?

That is a very odd title, but it did happen. My Brother had just moved into a new town-home complex, and there were a few idiosyncrasies that he found in his new place, but he didn’t notice this issue for a little while after moving in. He really only noticed one day when he sat down and noticed the warmth emanating from the commode, and only then realized that his toilet was connected to the hot water system for his house (not a huge issue, but it would waste a little money for a long time).

Pyromania is burning the unburnable!

No, it wasn’t that hot

Are you flushing hot water in your financial home? How many fees are you paying that you are unaware of, or worse, are ignoring? What kind of fees am I commenting about?

  • Bank fees, do you still pay those? There are so many banks that offer zero fee accounts, why are you flushing that hot water (money) down the toilet?
  • Entry fees, exit fees and high MER Mutual funds? Seriously, how many times do we (pretty much everyone writing about investing) have to write about this topic? Evidently, we have not hit the maximum count yet. They are called Index Funds, look it up.
  • What are you paying in Insurance rates? Are you shopping around? Remember that insurance is only for ” … in case stuff happens …” (to paraphrase Chris Rock).  If you are overpaying for insurance your money is flushing away.

Am I missing any other Financial Toilets that flush hot water ?

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Financial Knowledge Draining Away

I was reading a very interesting article in the Bloomberg Businessweek† “Chowing Down on Boomers’ Brains“, which talks about the huge loss of “tribal knowledge” with the retirement of the Baby Boomers from the workforce, and it has me wondering just how well our Banks are going to deal with this “brain drain” from their ranks? Evidently some very large firms in the states (GE, GM and others) have this as a major risk in the near future.

As an example in my little part of the Government, about 25% of our department is going to retire this year. This might be an extreme example, but how we are going to keep all that “tribal knowledge” or “industrial memory” is not clear to me (as most folks are not being hounded to do “brain dumps” of what they know).

Retirement

Collective Knowledge Wandering off Into the Sunset

What does this have to do with banks, you might ask? The banks and government have 1 common stream, they both have very nice Pensions for their employees (in most cases), so in most cases folks who can retire, will retire (i.e. will not keep working because they can’t afford to retire).

If you want a concrete example of the danger of “brain drain due to retirement”, you need only look at the infamous Y2K fracas, where banks had to pay an exorbitant amount of money to “contractors” to repair COBOL code that could not deal with the concept of a year having more than 2 digits.

Is this going to happen again? I don’t know, but I just wonder how much “collective knowledge” in the banks (about day to day business, information technology and other operational areas) is simply wandering off into the sunset of retirement? I guess we will find out when we see how many folks are hired back on contract to maintain antiquated but essential systems. Another interesting angle to this discussion is that the CRA is a government agency and is most likely suffering the same issues with retirements as well? Maybe they will forget how to tax us? (OK, maybe that one is a stretch).

Can the banks plug the brain drain? Let us hope they are thinking about that.


– Note that while Bloomberg Businessweek is an expensive magazine to buy and read, it is available from the Ottawa Public Library (for free) using the Zinio application, keep that in mind.


Photo by satit_srihin. Published on 31 January 2016 at FreeDigitalPhotos.net

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TFSA Transfer Fees

So at the end of last year, I wrote about things to do at the end of the year, and I “poo poo’ed” someone who mentioned (in a comment) that you could skirt the TFSA transfer fees  if you took the money out at the end of December, and then deposited it in your new TFSA at the start of January. I thought, “How expensive could that transfer fee be?”, and luckily my friends at TD sent me a helpful update on my accounts that helped clarify it.

TFSA Swap

TFSA Year to Year Swap to Change Providers

“… TD Investment Services Inc. is introducing a new Transfer Fee of $75.00 plus taxes per transfer, effective March 1, 2016. This fee applies to each transfer of a TD Mutual Funds TFSA to another financial institution. This fee does not apply to a transfer to another TFSA within TD Bank Group. This fee will be collected from the bank account associated with your TD Mutual Funds TFSA that is currently used for purchases, pre-authorized purchase plans and redemptions. If you do not wish to accept this fee you may close your TFSA or transfer it to another financial institution without cost or penalty.
You can do so by informing us no later than 30 days after the date the fee comes into effect. Please note that, by using your TFSA or keeping it open after March 31, 2016, it means that you have accepted this fee. If you are considering a TFSA transfer, or require additional information, please visit your TD Canada Trust branch or call us at 1-866-222-3456 to speak to a Mutual Funds Representative today….”

Seventy Five Dollars? $75? Holy cow, talk about, “don’t let the door hit you on the way out customer service. Notice that you can avoid this fee, if you choose to close or transfer your account from your TD Mutual Funds TFSA vehicle. As I have mentioned I have had many interesting issues with my TD Mutual Funds RESP account, so my opinion would be to open an account elsewhere in the next month or so, and transfer your account there.

Also, my sincerest apology to any commentator who mentioned the idea of the transfer TFSA at end of year gambit as well, I guess there are situations where this might make perfect sense.

 

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