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By Ian Duncan MacDonald
Special to the Financial Independence Hub
Recently I read an article by a financial advisor with “25 years of experience in dealing with individual investors.”
He sees his role as a coach helping” investors ignore Wall and Bay Street hype and hysteria ….” As he sees it, only investment advisors can protect investors from themselves. He sees these ignorant self-directed investors as, “piling into the market after superior stock returns and before inferior returns,” “ignoring tax ramifications” and foolishly “investing for entertainment.”
When you give access to your money to an advisor you are immediately creating the potential for that advisor to use your money in their self-interest: not yours. While this advisor does address investment advisor fees, “The financial regulators require us to disclose them.” He does not touch upon the seemingly daily reporting of investment advisor thefts of client money nor all the “legal” but murky ways that investment advisors can siphon of your money.
(The “full-service fee schedule” account you signed probably allows all the following fees to be charged against your investment account: operating fees such as custody fees, interest charges on debit balances, fees for manages and fee-based programs, transaction fees, foreign transaction tax, issuer commissions, service fees, fee for managing funds, deferred sales charge, referral fee, etc). Self-directed investors are shielded from almost all of these fees.
On rare occasions investment advisors get charged with theft:
“Posted On Wednesday March 24, 2021
The Halton Regional Police Service – Fraud Unit has arrested a Burlington man in relation to a fraud investigation.
The accused was an investment industry professional who worked for a financial company that was registered with the Investment Industry Regulatory Organization of Canada (IIROC). Between 2011 and 2016, two victims invested a total of approximately $1.6 million with the accused to purchase insurance and other investments. The accused diverted the funds he received from the victims to his own bank accounts.”
The following is just the last month’s reporting of investment advisor IIROC disciplinary hearings plus their last statistical complaints report:
Statistics Filed by Dealer Firms (COMSET)
“IIROC rules require Dealer Members to inform IIROC, using IIROC’s Complaints and Settlement Reporting System (ComSet), when certain events occur, including when a Dealer Member receives a written client complaint, when criminal charges are laid against a Dealer Member or any of its individual registrants, or when a securities-related civil claim is brought by a client.” Continue Reading…
