“If I were you, I would check out ETFs.”
And that’s how it started. An idea was planted in my head. A little nudge from a friend of mine. This was back in 2009, when Exchange-traded Funds (ETFs) were not widely known. I had never heard of the term before, and I did not know much about investing apart from hearing whispers that I should just go to MD Management, hand over my money and let them “handle it.”
I was just finishing up with residency/fellowship, and was about to embark on my first staff physician job. Since my pay cheque was about to dwarf my resident’s salary, I figured I should probably know the basics about investing, so I asked my friend for his advice. At the time, he was working as a financial advisor at Bank of Montreal (BMO) with “high-net worth clients” (portfolios over $1 million); thus he seemed like a good resource to start with. Looking back, I am extremely grateful for his honesty and transparency, as he could’ve easily recommended that I hand over my money and let him “handle it.”
I asked him what he recommended to his “high-net worth clients” to invest in. His answer: BMO mutual funds. Made sense, since he was at BMO.
Not all advisors invest alongside their clients
Then I asked him what he invested his own money in. To my surprise, he invested his own money in ETFs, and did not hold a single BMO mutual fund. I had always thought “wealthy” clients had access to the “best” investment products, so naturally, he would have done the same.
What??? I was confused!
Paraphrasing his answer: “At the beginning of each month, financial advisors are told to recommend specific mutual funds to their clients in order to meet quotas, which in turn results in bonuses/commission fees. The funds usually have a high MER (2% and above). It lines my pockets and the bank’s pockets. If I were you, I would check out ETFs.”
Looking back, I realize my friend was not your typical financial advisor. He enjoyed reading books on personal finance/investing topics, and was quite knowledgable about investing. Needless to say, he become disillusioned with the banking industry with all the sales tactics and the commissions and quotas driven nature of it all. Not long after our conversation, he left the banking industry to pursue a career in a different industry that made him much happier.