“ABOUT YOUR FINANCIAL MURDER...” 2018 Non-Fiction Book

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“ABOUT YOUR FINANCIAL MURDER...” 2018 Non-Fiction Book

Postby admin » Mon Mar 11, 2019 6:28 pm

“The scandal isn’t what’s illegal, it’s what’s legal”
-John Bogle

March is fraud prevention month in Canada but don’t count on securities regulators to warn you about the nasty tricks their registrants are allowed to play, all in plain sight. They focus on scammers they don’t regulate.

In June of last year securities regulators rejected a proposal to eliminate embedded sales commissions and a proposal for advisors to act in the client’s Best interests. You should therefore assume your Rep is operating under conflicts-of- interest, some of which cannot be mitigated e.g. a sales quota
First off, the vast majority of advice givers are actually registered as salespersons (Dealing representatives or Registered representatives) not as advisors.
These “advisors” are not required to act in your best interests - they need only provide suitable recommendations which typically excludes costs as a determinant of suitability.


The fear tactic is a common ruse with shady Reps. Look, we all understand investing in the future is imperative. But so is drinking water and eating food to stay alive. It’s highly unlikely that you’ll live on the streets or ruin your children’s college dreams if you take a moment to consider all investment options. Bad Reps will push clients just to make a sale, so if you’re feeling coerced in your decision- making, you probably have the wrong advisor in your corner. Avoid making hasty decisions on investments.

Those who sell mutual funds may tell you that advice is free- in actual fact it is built into the fund price in the form of a trailing commission which is paid to them as long as you own the fund. Advice tied to the sale of a particular product should not be counted upon to be trustworthy. Independent empirical research has shown these hidden incentives lead to skewed advice.

You may be advised to borrow money to invest to magnify your gains. What you need to understand is that the more you buy, the greater the commissions your Rep receives. Your Rep may even receive a fee for referring you to a lending institution. You however will be exposed to added risk.
Many Reps work on a commission grid. This grid may reward them more for selling certain types of products rather than others. Guess which products you will be sold.

Despite all the laws, rules and regulations, Discount brokers improperly receive trailer commissions for providing unique services and personalized advice. You should not have to pay for services and advice that is not provided. While regulators fiddle, a few law firms have filed Class action law suits against the mutual fund companies that make these payments on the basis that Discount brokers are not even allowed to provide advice.

It happens that core documents such as New Account Application Forms that contain important personal information are adulterated in such a way as to make
unsuitable recommendations appear to be suitable. Ask for a signed and dated copy of your Know Your Client Form to verify that what’s on file matches your reality.

Reps have many other commission generating tools at their disposal. They can invent a investing strategy that involves a lot of trading ( and a lot of commissions) They can sell you a DSC mutual fund and then decide to redeem it and buy another DSC fund and start the 6 year redemption schedule all over again. Each time they can make 5% which is a huge advice skewing incentive. Most mutual fund Reps are dually licensed so they can use regulatory arbitrage to sell you a Segregated fund, an expensive version of a mutual fund with a life insurance wrapper. Insurance regulators are even less demanding than securities regulators with their lax enforcement. and wrist slap fines. You need to be real sharp to pick up on this maneuver.

The best financial Reps cater to their client’s needs before their own. Older clients might hesitate to take recommended risks as they near their retirement years, and instead they are looking for ways to lower their risk profiles. The older generation is more susceptible to fraud in all forms and apt to take more risk than their situation warrants, research suggests. Be wary of Reps who urge risky moves, such as mortgaging a home that’s already paid off to fund further investments or complex strategies, once you’ve already paid off debts or downsized your home in preparation for retirement. These types of recommendations and Reps should be avoided.

When you complain, you are likely to be treated unfairly. Assume the relationship is adversarial and you will be better equipped to defend your complaint. Watch out for internal “ombudsman” - they are fakes, they are not independent. If you are dissatisfied with a dealer response to your complaint, go directly to OBSI- do not waste time with these ‘ombudsman”.

You should note however, that even though OBSI is at least quasi-independent, their recommendations for compensation may be rejected by the dealer. Securities regulators have steadfastly refused to give OBSI a binding recommendation mandate. Ultimately, you may have to go to court or abandon your complaint.

Of course real fraudsters lurk among the regulated population. Watch out for unauthorized trades, offers to sell you products outside of the dealer or requests to loan money to your advisor. Regulators use terms like “misappropriation of assets “ to describe outright fraudsters. Many times firms will deny any accountability for such abuses - stay alert and don’t do any side deals with your representative.

These traps are just a few awaiting the unsuspecting investor. A book could be written about all the tricks used to move cash from your savings into the pockets of the so-called wealth management industry. In fact, investor advocate Larry Elford has done exactly that.

Read Your Financial Murder. - details available at.http://www.lulu.com/shop/http://www.lul ... bout-your- financial-murder/paperback/product-23702171.html CAVEAT EMPTOR
Kenmar Associates March, 2019

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