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Signs your adviser doesn’t know anything

This post is a Guest Post, and you know my Opinion of Guest Posts normally, however, I think this post is quite entertaining and a nice follow on to a Podcast by Preet last week. Barry Choi can be found on Twitter as well.

This is a follow-up to my recent interview with Preet Banerjee which can be found here.

After being disappointed with my once a year mutual fund check-up at my bank I thought it would be a good idea to switch to a financial institution that dealt with just investments.  I figured my adviser would be looking out for my best interests but in the end I should have paid attention to earlier signs that he was only in it for his own benefit.

Signs your adviser doesn’t know anything:

He wants to be friends – What?  Friends?  I don’t want another friend, nor do I need an invite to your kid’s birthday party, I need someone to help me meet my financial goals.  All my adviser talked about was meeting up for coffee or lunch with my then girlfriend now wife.  It’s now obvious to me he just wanted be friends so he could get into my social circle and get more business.  Plus it was just creepy.

His services are free – Free!  I love Free, where do I sign up?  Okay not free but it was a tiny fraction of a percentage which would cost me nothing according to him.  Oh wait that fraction of a percent comes from a bigger percentage called the Management Expense Ratio.  I would later find out that all my funds also had a Deferred Sales Charge too.  Great, no mention of MER’s or DSC which could cost 10’s of thousands of dollars probably more.  Nothing in life is free.

Old technology – Whenever I met up with him I could not stop staring at his laptop.  This thing was HUGE it was at least 7 years old, he always had to sit by a power outlet, there was no wi-fi so he could never show me up to the minute info and half the time it wouldn’t even boot up.  Did I mention he didn’t own a cell phone and this was the year 2009?

Life Insurance – He kept pushing insurance.  This is one area where I had some knowledge so I stated to him that I have no dependents and no debt so why do I need insurance?  His response, oh it’s a tax shelter.  Okay sure but I still don’t need it now.  His second response, it’s how all the rich people get rich.  I’m pretty sure insurance only makes the people selling it rich.

No Previous Experience – When I met my adviser he was a security guard at my company.  Yes even I’m face palming as I write this.  He always talked about how he had a finance background and was just taking a break.  I now suspect his financial “knowledge” was limited to what his employer sold and a license to sell mutual funds.  Seriously some companies will hire anyone, a fair amount of people working at financial institutions really have no financial knowledge or background.

The Big Picture – He never asked me about my employee benefits.  My employer offered a Defined Benefit pension plan and basic life insurance.  At the time I didn’t understand pensions and I thought I was already doing a good job saving, so I didn’t look into it.  A real financial adviser would take a look at all benefits available to you, if you have a DB plan they would tell you to jump on that.  Actually I’m pretty sure my guy would have continued to push life insurance.

Broken Hand – One meeting he had a cast on his hand.  I asked if he was okay and if he was in an accident?  His response was his hand had met the face of someone he didn’t agree with.  How do I even respond to that?

I was able to leave my adviser and his company in the end without paying any fees because I had evidence, including e-mails and hard copies, that the plan he had set me up with didn’t meet the goals I was trying to reach and seemed to mainly line his pockets.  His superiors agreed with me and I found out six months later he was let go after an internal investigation revealed he had similar problems with other clients.

The upside of this whole situation is that it taught me to take personal finance seriously; no one will care more about your money than yourself.

Feel Free to Comment

  1. These are good points, but the deeper question is whether your advisor is acting in your best interest. Brokers are required to select investments that are only ‘suitable’ for their clients. Portfolio managers are mandated by the OSC to meet a best interest standard, legally requiring them to avoid conflicts of interest and act in their clients best interest. Read more here

  2. Love this one, especially the broken hand bit. Your points are right on the money. These guys are very good and their fees are often hidden or disguised. In America, it would seem a large mutual fund company like Vanguard or Schwab or Fidelity offers lower fees, but even with them you need to be careful and ask a lot of questions and do your own research and analysis.

  3. WOW. I’m reading this and I can SWEAR you’re writing about my former financial advisor, er, I mean to say mutual fund salesperson. But I didn’t write this. Eerie how there are so many of them out there ….

    1. I just finished listening to Barry’s podcast with Preet, and again, wonder if we were dealing with the same mutual fund salesperson. Mine was from { Name redacted } as well. I believe their business model is fundamentally flawed, as salespeople make a huge commission putting their clients in DSCs. And {redacted} hires anybody off the street. Provided they have a pulse. My mutual fund person also fraudulently changed documents so that it looked like he had a discussion with me about “A” versus “B” funds. Interesting that he’s not selling mutual funds anyone (maybe because he now has a record with MFDA and IIROC and can’t get insurance???). He’s now an insurance salesperson (another regulatory body). Ha. Wonder how long that will last before they catch on he’s a snake.

      NB: Editor has redacted names just so I am less likely to get { fill in the blank }

      1. @Marissa

        When I got my fees returned to me I signed a release so I won’t publicly say my old adviser’s name or former employer.

        All I’ll say is his last name started with a J.

        Track me down on Twitter if the above matches your old guy

      2. Got it Editor. E-mail me privately if you want the name of Mutual Fund salesperson. I have docs to support what I’m saying/writing. It’s the absolute truth (and you’re not subject to slander or libel) if it’s true. And there’s evidence.

  4. I have to confess that I saw “red” over the mention of life insurance for wealth planning.

    In my specific case, this was the final straw that broke the relationship between me and my soon to be “ex” advisor.

    He was guilty of a number of mistakes, but mostly he could not give me a simple business case where the insurance made sense. I researched the issue on my own and found two legitimate business cases which did not apply to my situation.

    Furthermore, I had a hard time accepting that while I was paying him to manage the total account, his idea was to take a portion of my monthly allowance and re-invest it in an insurance plan with the same company. I viewed this as double dipping with no perceived value to me.

    The final insult was his assertion that the insurance would pay for itself because of fee rebates that I would be receiving. A year later, I still have not seen a single rebate.

    He has been walking with a limp ever since.

    To be fair, I will acknowledge that there are many situations where life insurance is needed and beneficial. The problem is that there is an inherent conflict of interest when an advisor is compensated to sell insurance as well as manage a portfolio. The advisor is paid twice for the same money. (in my case…)


  5. My wife got her haircut today at a local student-training Beauty School. To be a hairdresser requires 1400 hours of full time schooling, followed by 1400 hours of work experience, then some exams etc. To be a financial “advisor” (or a salesperson mis-using the advisor title) takes 30 days. If you are a victim of this, the second largest “bait and switch” fraud by the financial industry, I say GET YOUR MONEY BACK. I am a fairly disgusted-but-recovering broker and this is how people are demanding and getting their money back.

    1. While I won’t comment on your emphasis over practices in the industry, your concern about education is bang on. It’s embarrassing what one has to learn in order to sell life insurance. You don’t have to read a contract/policy. You don’t have to read an application. And it’s fine if you’ve never heard of present value.

      I’m president of a newly formed life insurance broker’s organization and we are going to lead with education. Our first courses will be for existing brokers, but I’ve go approval for the board for the third course I create to be one for new brokers in the industry. It’ll be free to anyone and available on the web. And we’re doing that because the lack of required education is a concern for some of us.

  6. This was hilarious reading until I realized it wasn’t fiction. Sorry, Barry, that you had to meet this guy much less deal with him, however briefly!

    It reminds me a lot of a “health” story my child had to read in school where they were showing you all the warning signs of why you shouldn’t go out on a date with someone. It just kept getting worse and worse with each word.

    Kudos to you for keeping a clear paper trail of your dealings. It helped mitigate your losses and it’s an excellent example for all of us on the value of documentation.

  7. He wants to be friends…geez.

    “I would later find out that all my funds also had a Deferred Sales Charge too.” Damn.

    “His response was his hand had met the face of someone he didn’t agree with.” Wow.

    Unbelieveable story. The thing is Barry, you’re probably going to be a much better and successful investor because of this dud. You should thank him really 🙂

    Thanks for sharing Barry.

    Will tweet and promote this week BCM.


  8. Rule #1, never mix investments and life insurance.

    Actually, maybe that’s rule #2. But if’s pretty darn close to rule #1 :).

    Mores eeriously, this comment does the insurance industry injustice:
    >>> I’m pretty sure insurance only makes the people selling it rich.
    That’s a pretty inflammatory comment. Also, it’s wrong. The rule of thumb is that 80% of insurance agents don’t last the first two years in the business. Would the industry see an 80% turnoever if it was making the sales reps rich? More likely that it makes them desperate for any kind of sale they can get, because they’re going broke.

    In any event, please don’t use your bad experience with one agent to publicly smear an entire industry.

    1. I think the statement is a strongly worded personal opinion, but the statement itself that the Insurance Industry makes money is correct. Smear? The Insurance Industry’s reputation for record profits and an ability to rebound after setbacks is well documented.

      Will the Calgary floods and such cause the Insurance Industry to take it in the teeth? Not sure, but I am also confident that the premiums paid by all of us will reflect any losses as well.

      Again that is my opinion, if you found the comment inflammatory, my apologies, however the Insurance Industry is a thriving industry.

      1. >>, but the statement itself that the Insurance Industry makes money is correct
        C’mon. That wasn’t what the statement said or inferred. He didn’t say “the insurance industry makes money’. He said – lemme quote here –

        “I’m pretty sure insurance only makes the people selling it rich.”

        He didn’t drop that in there to remind us with a factual statement that insurance companies make money. It was a counter to a suggestion from his broker. What he should have said was “I’m pretty sure this policy will only make YOU rich”. But that doesn’t fit the ‘if it bleeds it leads’ that he seems to be trending towards.

        This guy works in the media specializing in personal finance, right? Maybe he should be held to some minimum standard if he’s going to run around the internet promoting inflammatory stories. Like fact checking, or speaking to an expert for an opinion, before he starts speaking publicly.

        1. Also, I’m pretty sure that life insurance DOESN’T make policy holders rich. It’s not intended to be a jackpot you can win if your husband happens to kick it. If advisors are selling insurance based on the premise that it will make you rich, they deserve to be lambasted.

    2. Hey lifeinsurancecanada,

      I actually have no problem with life insurance it is for sure something that needs to be part of your wealth planning. If my old adviser had suggested term insurance or at the very least showed me pros and cons of say term vs. whole life then I’d be willing to listen more.

      This “adviser” gave me no real evidence, so the real point of the story was to show people to investigate further when their advisers blindly suggest things at you.

      I for sure plan to use an insurance broker in the future but at the name it made no sense

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