advisor fraud, professionals, or salespeople masquerading?

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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sat Sep 07, 2019 8:32 am

Scotiabank cuts deep in wealth management

Screen Shot 2019-09-07 at 9.29.08 AM.png


https://www.theglobeandmail.com/newslet ... e29779249/

Scotiabank cuts deep in wealth management
PUBLISHED APRIL 27, 2016
UPDATED MAY 16, 2018
0 COMMENTS

Bank of Nova Scotia's latest restructuring efforts have spread to its wealth management arm, with major changes to the ScotiaMcLeod retail adviser network announced this week.

In mid-April, the bank announced a review that "advances strategic measures to further position the bank for long-term success," citing "significant ongoing shifts in consumer behaviours, particularly digital banking adoption."

Rival Big Six banks face similar threats and have been cutting costs as Canadians increasingly opt for digital banking.

This week, Scotiabank's wealth management unit was also targeted by the review, with at least 7 per cent of ScotiaMcLeod's brokers let go, as well as their assistants, according to people familiar with the decision.
Scotiabank would not confirm the exact number affected.

The nature of the job losses represents a shift in the lender's long-term wealth management strategy.

When cost control is a top priority, there is little surprise when underperforming staff are dismissed.
But the latest cuts targeted brokers who brought in as much as $650,000 in annual fee-based revenue, a source said, including those with assets under management ranging from $75-million to $100-million – a level that previously allowed advisers to qualify for bonuses.


Now, the bank seems focused on serving the wealthiest clients and employing brokers with megabooks of business – the most assets under management – a burgeoning trend across the industry. Story
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sat Sep 07, 2019 8:19 am

Walking into a GOC Canadian Chartered Bank Act branch to talk to an advisor about investments can be an exercise fraught with hidden risks.

Here's some background information that might help you avoid some of the pitfalls.

~Graham Hughes, PFP (23-years)
Screen Shot 2019-09-07 at 9.18.43 AM.png

https://www.themoneygeek.info/the-geek-blog/

The Problem With Canadian Investment Advisors
Inside Out: What’s Wrong With Canada’s Investment Industry?
September 5, 2019
by Graeme Hughes, PFP
There’s an awful lot of noise being generated around the investment industry in Canada. It’s as if everyone agrees that, somehow, the system is broken, but no one can quite agree on what the problem is, or how to fix it. Unfortunately, in my view, the anger is often misdirected, and in the absence of a clear understanding of what’s broken, it’s hard to imagine that a fix will happen any time soon.

To try and maybe clear the air a little, I’d like to offer my take on what I think is the point of failure, based on my many years of experience in the industry. Hopefully, we can figure out both the challenges and opportunities that exist, and eventually work toward an industry that works for all.

So here is my view of Canada’s investment industry, looking from the inside, out.

Table of Contents
A Background On The Structure Of The Industry
The Road To Hell Is Paved With Good Intentions
Not All Bank Employees Are Equal: Salespeople
Bank-Based Financial Planners
Where It All Falls Apart: The Sales Process
Do MFDA Advisors Really Believe In What They Are Selling?
Why Don't Regulators Do Something?
So What's The Solution?
A Background On The Structure Of The Industry

The investment industry in Canada is broken down into two teams, in a way. Team #1 are brokers, who are licensed under the Investment Industry Regulatory Organization of Canada(IIROC). Brokers are licensed to sell stocks, bonds, and Exchange Traded Funds (ETFs), as well as mutual funds. They can also have add-on licensing that allows them to sell more sophisticated securities such as options. They generally work for either bank-owned or independent brokerages, and frequently have a financial planning designation (PFP, CFP, etc.) as well.

Team #2 are advisors who are licensed under the Mutual Fund Dealers Association of Canada (MFDA). MFDA-licensed advisors are able to sell mutual funds only, not stocks, or bonds. They may sell ETFs if they meet certain proficiency requirements, but that is a more recent development and most MFDA-licensed firms lack the necessary trading platform to transact in these products. These advisors sometimes have a financial planning designation, and they are most often found in Canada’s banks. They are also present in independent firms such as Investor’s Group and Primerica.

Although I have worked for both IIROC and MFDA firms, this article will largely discuss the MFDA business as it seems to be the side that generates the most complaints, appears to have the most problems, and is the business I know best.

Keep in mind as well that I left the business two years ago, so some things may have changed in the time that has passed.

The Road To Hell Is Paved With Good Intentions

One area where the banks have offered a good deal to Canadians is in making advisors available to people of even modest means.

If you walk into an IIROC-licensed brokerage in any major market in Canada (particularly a bank-owned brokerage) you’ll probably be hard pressed to have a conversation with anyone unless you have at a bare minimum $500,000 to invest. The pressure on brokers to cater to wealthier clients is highlighted by a certain bank-owned brokerage that not too long ago axed any advisor who wasn’t generating at least $650,000 in fee-based revenue. Brokers generally have no time or appetite for the small investor. (link: "Scotiabank cuts deep in wealth management”, https://www.theglobeandmail.com/newsletters/streetwise-and-rob-insight-newsletter/scotiabank-cuts-deep-in-wealth-management/article29779249/ )


Enter Canada’s banks, who have an MFDA-licensed advisor available to help just about any size investor, even if you are starting from $0. The banks even provide accredited financial planners, usually for families that have in the neighborhood of $100,000 or more to invest. As far as democratizing advice and making it widely available, the banks have done a pretty good job.

Unfortunately, this is pretty much where the good news ends. The banks have allowed their dominance of this market to lead to some very bad habits.

Not All Bank Employees Are Equal: Salespeople

One of the challenges of the bank model is that it can be hard to know who, exactly, you are talking to in the bank. The most common employee who may talk to you about investments is the general salesperson. They often go by titles such as Financial Services Manager or Financial Advisor, but often these are folks who were tellers a few months ago.
The only licensing they usually have is a license to sell mutual funds, which is obtained by completing a short course, followed by a 100-question, multiple-choice exam that they need to score at least 60% on. After that is completed, they receive another 90 days of on-the-job training and supervision.


In addition to investments, these salespeople are also tasked with selling bank accounts, credit cards, term deposits, and sometimes mortgages.

Needless to say, these folks are often not well equipped to do much on the investment side of things except take instructions from a client. Any advice they give is very likely to be a generic talking point that was passed on to them from the institution they work for, that they may or may not understand.

These salespeople are often under intense pressure to sell product. At one institution I worked for, the branch manager was mandated to sit down with each salesperson three times a day:

once in the morning to talk about their appointments and what they planned to achieve that morning;
once at noon to see if they met their morning sales objective and talk about their objectives for the afternoon; and
a final time at the end of the day to see if the afternoon objective was met.

This type of intense scrutiny goes beyond micromanagement and is dangerously close to simply being insane. All sales made by the salespeople are closely tracked, and salespeople, sometimes from across the country, are compared against each other based on the volume of sales made. And look out if you happen to be hovering near the bottom of those lists!

Sales performance is also used to determine year-end bonuses and, in many cases, eligibility for promotions.

Bank-Based Financial Planners

The in-bank financial planners represent a step up from the salespeople. More often than not, the term “Financial Planner” is in their job title, and these days they almost always have to have a financial planning designation to be in this role. That designation is typically either the CFP (Certified Financial Planner) or PFP (Personal Financial Planner).

The good news is these folks have the extra training and can often do a reasonable or even good job of financial planning, if they so choose. The bad news is that the sales pressure experienced by the other bank staff is applied equally, if not more so, to the planning team. Financial Planners are also either base-plus-commission employees, or commission only.

My experience is that the banks put very little emphasis on completing quality financial plans (although some planners do this anyway) and see the financial plan as a way to get information out of the client, and provide up front value that will then make the client feel obligated to invest with the advisor. Quality control, when it is done at all, is at most a spot check of a couple of plans that were done in the previous quarter. Often the planner is told which plans will be looked at in advance, in case any cleaning up is needed.

In one audit of my financial plans, my supervisor, who was conducting the audit, confided that he had never completed a financial plan himself, and that I would have to ‘tell him what he was looking at’.

Where It All Falls Apart: The Sales Process

When you are a bank employee, the bank makes no bones about the fact that everything, at the end of the day, is about the bottom line. And nowhere is that clearer than in the sales process. Without giving away any corporate secrets, and based on my own experiences, here’s a rough idea of how commissions tend to work for many bank-based financial planners:

Assets that are “new to the bank”, which usually means on deposit less than six months or a year, generate regular commissions, whereas assets that have been on deposit longer generate as little as 5% of the commission.
Selling certain products, such as wrap accounts, portfolio solutions, or select funds targeted by the institution, can boost commissions by 60% or more.
Index funds can generate commissions that are as little as 10% of the regular commission amount.
Selling non-bank funds is either prohibited, or done at drastically reduced commission rates.
Guaranteed Investment Certificates (or Term Deposits) generate a fraction of the commission of mutual funds.
Stock-market-linked GICs generate a bonus over and above the regular GIC commission amount.
It’s easy to see how a structure like this can drive perverse behaviors. The push is on to sell mutual funds over GICs, high-fee wrap products over “stand-alone” funds, bank funds over funds from other manufacturers, and no one ever, ever, sells an index fund.


Further, existing clients are often ignored in favor of chasing new assets. I even knew planners who recommended clients transfer assets to another institution, then write a cheque for an investment purchase, so that the assets would be commissioned as “new” and qualify for the much higher payout.


These numbers didn’t just impact commissions. Planners have sales targets that have to be made as well, and the penalty for missing them consistently is often termination. An index fund that generates only 10% of the commission, may also generate only 10% of the credit to your sales target. So a $100,000 investment sale is only credited as $10,000. In many cases, any planner who consistently sells cheap index funds will first starve to death, and then be fired.

And the termination threat is very real. I don’t think I ever worked on a team that had more than 20 people on it, yet every year at least one or two would either be let go, or would jump just prior to being pushed.

This is only the tip of the perverse-sales-process iceberg. There simply isn’t enough time or space to delineate all the ways that numbers, sales, and clients are twisted and manipulated to conform to questionable corporate mandates.

Do MFDA Advisors Really Believe In What They Are Selling?

This is a question I have been asked a number of times, and it’s hard to answer. Certainly, for mutual-fund focused businesses, low-cost ETFs are seen as an absolute threat. And a lot of effort is put into countering that threat through “educating” the sales teams.

Over the years, I have been subject to plenty of training on:

The purported benefits of active management.
Why passive investing can’t possibly match the benefits of actively-traded funds.
How mutual fund fees (often well in excess of 2%) are providing value to clients by providing an avenue to obtain valuable planning services.
Why selling bank funds is superior to selling funds from non-bank manufacturers.
For advisors who spend years being subjected to this, it’s hard not to absorb it to a degree. And it’s often seen as critical information in order to maintain your selling advantage in the face of competition from other firms, and an increasingly skeptical public.

Deep down, I think most advisors know fees are an issue. They saw it in all the hand-wringing over the CRM2 disclosure guidelines. However, there is simply no benefit in even acknowledging it because it doesn’t fit the narrative of the corporations they are working for. Trying to push the low-fee narrative will only land you in hot water for not aligning yourself with “the team”.

Why Don’t Regulators Do Something?

So, with all this going on that’s clearly not in the interests of investors, surely the regulators will step in and clean house, right?

Don’t bet on it.
Both the MFDA and IIROC are what’s known as “self regulatory” organizations. In other words, they are set up by the industry, to regulate the industry.


Let’s look at the MFDA. According to their 2018 Annual Report, the MFDA took in $35-million in revenue.
Where did that money come from? It came from the member firms. Where did it mostly go? Well, $26-million went to salaries. Do you really think a bunch of people who are collecting nice paycheques from the industry are going to be really enthusiastic about biting the hand that feeds them? Probably not.


Further, about half of the board of directors of the MFDA are representatives of the member firms. Again, how likely are they to crack down and clean up? I’m guessing not very.

So What’s The Solution?

We’ve come to the point where the industry, both on the IIROC side and the MFDA side, really needs transformative change to once again focus on the client. Too often, writers and commentators are quick to place the blame at the feet of bad advisors, but as can be seen from the above, bad advisors are really a symptom of bad institutions.

The advisors, to a large degree, simply work in an environment where they have no autonomy, no authority, and no voice in how the business is run.
Most bank-based financial planners are given a document to sign at the start of each new fiscal year. That document is the compensation plan and sales targets that will apply to you, as a planner, for the year ahead. Your options often are, literally, sign it or leave. No discussion. No negotiation.


In order for change to happen, it has to come, not from the employees, nor from the self-regulatory organizations. It would have to come from the federal or provincial governments, via the securities commissions.

I would humbly recommend that a great first step would be to do the following:

An outright ban on any compensation structure that encourages the sale of one product, or one particular manufacturer’s product, over another. All advisors should be free to recommend a product that they feel is in the best interests of the client in front of them, without worrying about impacts to their paycheque, or longevity in their job.
Further, MFDA-licensed firms have the ability to sell ETFs, so they should train their employees appropriately and get the necessary infrastructure in place to do so.
Lastly, anyone advising on investments should be trained to accept that they are advisors first. Not salespeople. That means the needs and interests of the client must be paramount.
Further, all advisors, not just financial planners, should be subject to ongoing continuing education requirements.
The reality is that the lion’s share of advisors in Canada work for either one of the Big Six banks, or one of the brokerages that they own. If you change the practices of these six companies, you will have almost instantly changed the industry. That should be the focus of everyone who wants to see the industry do better.

Failing that, the one thing these institutions love more than anything else is their profits. If you want to push for change, either move your assets to a self-directed platform (my favorite is Questrade, which I use myself), or find an independent, fee-based advisor who will take you on.

If enough people vote with their feet, and their assets, maybe the Big Six banks will be forced to change sooner, rather than later.

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The information above is for general informational purposes only and does not in any way constitute an offer for the purchase or sale of any security and is not intended to be considered comprehensive or personalized financial or investment advice. themoneygeek.info assumes no responsibility for the use or application of this information. Always consult a tax, investment, or other appropriate professional before adopting any new financial strategies.

Graeme Hughes - The Money Geek
Graeme Hughes, PFP

I am an accredited Financial Planner with 23 years of experience in the financial services industry. During the course of my career I completed hundreds of financial plans and recommended and sold hundreds of millions of dollars of investment products. I believe that financial independence is a goal anyone can aspire to and I am passionate about helping others to live life on their own terms.
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sun Aug 31, 2014 8:04 pm

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Systemic Investment Industry deception on a scale of hundreds of billions each year, well hidden from public view.

The passing-off of commission sales agents, who are NOT legally licensed as "advisor" or even as "adviser" (with the SEC),…….. as professional "advisor's" is doing more harm "duping" North American society than a good portion of all other crimes in the country, combined….


I am a recovering broker, in Canada, who worked his career with the largest bank owned broker here (RBC) and perhaps 9th largest in the US (according to them at one time)

Myself and a few colleagues have worked over a decade toward honest accountability (making me a whistleblower….) in our areas of expertise. My area was in retail investment sales. I submit to you 88 words by SEC chair Mary Joe White in a 1.5 minute video and three short, but good national press articles about what we feel shine a light on the greatest systemic investment deception we have discovered. Tens of billions of dollars each year are cheated and shortchanged from investors here in Canada, and I can only imagine the magnitude of the damage to those in the US. Regulators are wilfully blind to the acts of deception:


http://youtu.be/TqBSiR6VwP4?list=UUy8dpTRZHEz-0JBa_l0w7AQ 1.5 minutes
88 words from SEC Chair Mary Jo White (describes the differences in duties to clients between those who legally call themselves "adviser" and those who call themselves "advisor" (no legality) (root of the deception)


http://blogs.wsj.com/totalreturn/2012/07/05/should-you-go-to-an-adviser-or-an-advisor/ Wall Street Journal Blog

http://www.ft.com/intl/cms/s/0/21b52478-068c-11e4-ba32-00144feab7de.html?siteedition=intl#axzz3AzDJwB5j Financial Times

http://www.nytimes.com/2010/03/04/your-money/brokerage-and-bank-accounts/04advisers.html?ref=business&_r=3& New York Times


http://www.moneygeek.ca/weblog/2014/06/05/your-financial-advisor-deceiving-you/ Former Hedge fund employee, Ph.D, blog

I thank you for your time, and your work on behalf of the public interest. If I can be of any help in this, I am at your service.

BAD ADVISOR.jpg



Larry Elford
Former CFP, CIM, FCSI, Associate Portfolio Manager, retired
Alberta, Canada T1J 1N3 lelford@shaw.ca


keywords: deception grand
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Thu Aug 28, 2014 9:54 am

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images.jpeg (5.46 KiB) Viewed 21169 times


It is sleazy.
It is abusive.
It is unprofessional.
It is illegal and against written industry rules.
It is allowed for big money.
It is done by our most "trusted" investment providers.
It is covered up by captured regulators.
It is suppressed by nearly all business media.
It is your money that gets taken.

Comment from Stan:
I believe the fundamental cause for investor loss is labeling the commission motivated sales force of sales persons as "Advisors" and "Vice Presidents". This gains the trust of Canadians. Canadians are not stupid. Most are more than busy with careers and families. We also trust ... maybe when we shouldn't but when the regulators, media and Government says the investment industry is well regulated, the regulators say they protect investors, and the top dogs make over $700,000 per annum, there is just reason to believe.

Children are taught to believe in Santa Claus and the Tooth Fairy by the parents they trust. Small investors are taught to believe in "Financial Advisors" by the Government and regulators they trust. The media also helps to perpetuate this deceit.

In my opinion Brisko's August letter makes it perfectly clear. The titles "Financial Advisor" and "Vice President" are simply that (titles) and have no (legal) meaning. Why then do Goverment and regulators allow this to happen when it facilitates the fleecing of Canadians. Do they not realize how many lives are destroyed?

Investor education, better disclosure, more rules and regulations, more studies and reports, may make some feel they are doing something but it will do little to change the investment environment. As long as we accept the deception, Canadians will continue to trust their so-titled "Advisor".

The four words I have found most chilling for many years when I have spoken with small investors is "I trust my Advisor". Every individual I have met who lost a major part of their life savings trusted their so-titled "Advisor".

Even Earl Jones who was not even registered was able to gain trust by using a title of "Advisor".

It seems perceptions are hard to dispel. How do we get the message to Canadians so they can see the light? It seems few other than those who have had significant loss really understand.

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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sat Aug 02, 2014 1:20 pm

Advocate comment:
The purpose of this posting is to highlight a "tilting" of rules and enforcement procedures in favour of investment industry players, and at harm to the public.

Of interest in this correspondence between SIPA (Small Investor Protection Association of Canada) and the CSA (Canadian Securities Administrators) is the following:

1. Persons who advertise themselves as investment "advisors" do not have to have that particular license or registration. Regulators will turn a blind eye to misrepresentation that favours the interests of the industry, (despite industry rules prohibiting misrepresentation by commission or by omission) while fooling the public into a false sense of security and trust in industry dealers. Only Quebec regulates and protects the public from title misrepresentation.

2. Investment dealers commonly give fake titles such as "vice president" to top producing commission salespeople, in further attempts to lure the public into a false sense of security and trust in what are mere commission sellers. (regulators also look the other way at this consumer misrepresentative practice)

3. The person (mis) representing his or herself to the public as an "advisor" has neither a fiduciary duty to care solely for the interests of customers, nor a "best customer interests" standard which to adhere to, despite this being sternly implied in the name, the actual license (advising rep) and in the marketing promises of the investment dealers who title their salespeople in this manner. (except in Quebec where they must place the best interests of the customer first)

4. The "suitability" standard is so vague, undefined and self-determined (by the selling dealer themselves) as to be shameful, and as such the email does not speak to it directly. It instead refers to separate bulletins which also do not speak, other than in legal jargon and obfuscating gobbledygook. Research and experience shows that such a vague term allows the VERY LEAST suitable choice, or the highest cost ( and commissions) investments to be sold to consumers, and yet still meet this consumer-cheating standard. Consumers who are not satisfied with that can always raise $500,000 in legal costs, and spend approximately ten years of their life in the courts, to prove otherwise, and the industry likes this fairness "hurdle" just fine.


Now to the email correspondence:


640px-Cross_ocean_big_ship_stranded.jpg
From: Besko, Chris (FINMSC) <Chris.Besko@gov.mb.ca>
Date: Fri, Aug 1, 2014 at 6:43 PM
Subject: Financial Advisor Registration
To: "sipa.toronto@gmail.com" <sipa.toronto@gmail.com>
Cc: CSA ACVM Secretariat <csa-acvm-secretariat@acvm-csa.ca>


Thank you for your letter of March 28, 2014. It was referred to the Registrant Regulation Committee of the Canadian Securities Administrators (which I chair) for a response. We have tried to answer all your questions as fully as possible, but if you have any follow up questions, please feel free to contact me directly.



For ease of reference, we have included your question (in italics) before each response.



Limitation Periods –
(Advocate comment: For purposes of brevity, a section of this email exchange related to Time limitation periods for compliant or civil action was removed. Also to keep this post on the topic of systemic misrepresentation)


Registration Classifications

1. Advising Representative – Is this the current classification for Advisers?

2. Dealing Representative – Is this the current classification for previous Sales Representative?

3. Financial Advisor – This is a common title used but there appears to be no classification. Are

these persons registered as Dealing Representatives?


4. Vice President – Are all vice presidents deemed to be officers of their firms?



The registration categories under securities legislation are set out in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. They are: dealing representative, advising representative, associate advising representative, ultimate designated person and chief compliance officer. These are the descriptions that apply to individual registrants for the purposes of registration. An individual who is acting as an adviser on behalf of a portfolio manager will be registered as either an advising representative or an associate advising representative. An individual who is trading in securities on behalf of a dealer (such as an investment dealer, mutual fund dealer, exempt market dealer, restricted dealer or scholarship plan dealer) will be registered as a dealing representative.



We do not prescribe specific titles to be used by those persons who are either dealing or advising in securities. Most securities legislation requires that an individual who holds themselves out as being registered to in fact be registered and to indicate the actual category of registration.


(advocate comments: Sadly, 13 provincial and territorial commissions ignore what I believe to be fraudulent misrepresentation or false pretence offences when they turn a willfully blind eye to approximately 150,000 registered "dealing representatives" who for the most part, strongly imply and represent to the public that they are registered as "advisors" (advising representative category).


Financial Advisor, as you noted, is a common title which many persons use, whether they are registered under securities legislation or not. The use of this title is not generally prohibited, and may be used by anyone, including persons who are only licensed to deal in insurance products, mortgage brokers, deposit agents, or employees of financial institutions. Some jurisdictions regulate the use of some titles. For example, in Québec, no person may use the title Financial Planner without holding the appropriate certificate issued by the Autorité des marchés financiers. The title Financial Advisor may not be used by anyone as it is considered similar to the title Financial Planner. Having said that, most jurisdictions do not regulate the use of Financial Advisor, and as such it is widely used.

(Common Sense comment from an investor who was misrepresented and then exploited by these so-called "regulated" investment practices:)
"We do not prescribe specific titles to be used by those persons who are either dealing or advising in securities." Wow! Well perhaps you should, since it is quite a deceptive game being played upon the unsuspecting investor.


As with Financial Advisor, the title of Vice President is increasingly a common title used in the financial services industry. While an officer of a firm may be designated to be a vice president, the use of the title is not reserved to actual officers of a corporation. As such, it is not safe to assume a person described as a vice president is in fact an officer of that corporation.



Suitability –

[i]Does suitability have a common definition for all provinces or territories, and what is the definition? To whom or which license categories does it apply.
[/i]


CSA staff published on January 9, 2014 CSA Staff Notice 31-336 Guidance for Portfolio Managers, Exempt Market Dealers and Other Registrants on the Know-Your-Client, Know-Your-Product and Suitability Obligations. We believe this notice will assist in understanding the suitability requirement and our expectation of registrants.



Fiduciary –
[i]Does Fiduciary Duty apply to Portfolio Managers and other registrants? To whom or which license categories does it apply?
[/i]
A common law fiduciary duty may apply to portfolio managers or other registrants, depending on the circumstances. Typically, Canadian courts have identified five interrelated factors to be considered when determining whether “financial advisors” stand in a fiduciary relationship to their clients: vulnerability of the client in the relationship, the trust and reliance that clients place in their advisor, the extent to which the advisor has power or discretion over the client’s account or investments, and the professional rules and codes of conduct of the advisor. In Québec, where a civil law regime applies, the fiduciary duty does not exist since it is specific to the common law. For further information, see Parts 3 and 4 of CSA Consultation Paper 33-403, including specifically the table in Part 4.

Best Interest –
[i]Is this standard in place in Canada? To whom or which license categories does it apply?[/i]

Four provinces (Alberta, Manitoba, Newfoundland and Labrador, and New Brunswick) have a statutory requirement that when advisers or dealers have discretionary authority over their clients’ investments, the adviser or dealers must act in the clients’ best interests. Investment fund managers are also subject to a statutory best interest standard all across Canada. In Québec, according to both the general civil law and the Securities Act (Québec), registered dealers and advisers are currently subject to a duty of loyalty and a duty of care and must act in the client’s best interest. The extent of these obligations under the Civil Code varies depending on the legal context and nature of the investment advisory relationship (e.g. discretionary account or non-discretionary account, executing broker only), taking into account the degree of trust, dependence and vulnerability of the client. For further information, see Part 4 of CSA Consultation Paper 33-403.



Hopefully this answers your questions. As mentioned above, please feel free to contact me directly with any follow up questions you might have.

Chris Besko
Acting General Counsel & Acting Director
tel. (204) 945-2561
fax (204) 945-0330

The Manitoba Securities Commission
500-400 St Mary Avenue
Winnipeg, Manitoba, R3C 4K5
Toll Free (Manitoba only) 1-800-655-5244
http://www.msc.gov.mb.ca

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keywords Manitoba, Besko, FINRA, Financial Designations

From IIROC Rules Notice Guidance Note Dealer Member Rules
Use of Business Titles and Financial Designations

Joe Yassi
Vice President, Business Conduct Compliance 416-943-6903
jyassi@iiroc.ca
Use of Business Titles and Financial Designations
Internal Audit Legal and Compliance Operations Registration Research Retail Senior Management Training
14-0073 March 24, 2014

No IIROC Approved Person should hold his or herself out to the public in any manner, including without limitation, by the use of a business title or designation of qualifications or professional experience that deceives or misleads, or could reasonably be expected to deceive or mislead, a client or any other person as to the IIROC approval they hold, their proficiency or qualifications. (fair, honest, good faith)

1 “Registered Representative” refers to the name of an individual IIROC approval category. An individual approved by IIROC to act as a Registered Representative is permitted to trade and provide advice to retail customers with respect to securities.
2 “Investment Representative” refers to the name of an individual IIROC approval category. An individual approved by IIROC to act as an Investment Representative is permitted to trade in securities for retail customers. An Investment Representative is not permitted, however, to provide investment advice.
3 The term “financial designation” is used generically throughout this notice to include credentials that are used to indicate that the individual has specialized knowledge or expertise in an area gained through education and/or experience.

http://www.iiroc.ca/Documents/2014/3254 ... b67_en.pdf
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sun May 18, 2014 9:26 am

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In Canada today it is current practice that most ”Financial Advisors” are registered as “Dealing Representative – A sales person – what they can sell depends on the firm they work for and their registration.”

(In the US, it is those licenced as "brokers" who usually call themselves as "advisors", check your US "advisors" licence here http://brokercheck.finra.org/Search/Search.aspx )


Over many years victims of loss of their savings believed their “Advisor” had a fiduciary responsibility, but that was not so. In some cases it was proven in court that the “Advisor” in a particular case, because of his actions and because of the client's lack of knowledge and dependence upon the “Advisor”, it was deemed that there was fiduciary duty in that particular case. However, fiduciary duty depended solely upon the "finding of fact" in the particular case.



Many persons do not see any difference between “Adviser” and “Advisor”. Dictionaries may give both spellings. On the other hand the industry literature by regulators and organizations is quite careful in the use of the two terms, but also fail to advise consumers and clarify the situation. The CSA in Canada and the SEC in the USA use “Adviser” to refer to those who give financial advice. The industry uses “Advisor” for those persons registered as “Dealing Representative – A sales person.” This practice is at best misleading for Canadian investors.

For several years there have been discussions about the duties of “Financial Advisors” and whether there should be a fiduciary duty or a requirement to look after a client's best interests. Ermanno Pascutto was instrumental in bringing this issue forward. It will likely be discussed for years.

Now that is not to say that all “Financial Advisors” act in the same way. Some do a good job for their clients, but they may in fact be portfolio managers and have a fiduciary obligation as defined in provincial Securities Acts. I have a broker registered as a Portfolio Manager although he is also called a “Financial Advisor”.

The CSA has clarified the situation with their document Understanding Registration. This document lists all registration categories. There is no “Financial Advisor” category but it is fact that most persons using the ”Financial Advisor” title are registered as “Dealing Representative – A sales person.”

The three main classifications (in Canada) that concern investors with “Financial Advisors” are:

- Portfolio Manager

- Advising Representative

- Dealing Representative - A sales person

(In the USA the license classifications to look for are "broker", and "registered investment adviser".)

SIPA recommends that every investor check the registration, qualifications, and discipline history of their “Financial Advisor” whatever their experience has been to date. Investors need to become aware of the facts. Many Canadians do not become aware until it is too late. Losing your life savings is traumatic and is a life-altering event. Many never recover and some do not even survive.

Please take the time to check with the Canadian Securities Administrators "Understanding Registration". http://www.csa-acvm.ca/uploadedFiles/Ge ... ion_EN.pdf


Small Investor Protection Association
http://www.sipa.ca
e-mail: sipa.toronto@gmail.com
tel: 416-614-9128
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Wed Apr 23, 2014 3:46 pm

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excerpt

The ASIC report reveals that the advice provided by financial planners is tainted with conflicts of interest. The regulator concluded that nearly 90% of licensee (i.e. dealer group) remuneration is paid by product providers in the form of ongoing commissions, up-front commissions, and volume rebates or manager fee rebates.

Only 10% is received in the form of client fees. ISN believes that reforming the financial advice industry should, at the very least, reverse this ratio: 90% of income generated by client fees and 10% by neutral product payments.

The ASIC report also demonstrated the critical need for consumers to be protected from being charged ongoing fees when no ongoing financial advice is being received, and that this should be accomplished by requiring consumers to regularly ‘opt-in’ to such fees (if asset-based fees are not banned altogether).

The ASIC report found that 3.1 million Australians, or two thirds of all of the clients of the largest 20 financial planning firms, are not ‘active’ clients. The inference is that these clients are continuing to pay ongoing advice fees but are not actively engaged with their planner.


link to report here: http://www.industrysuperaustralia.com/wp-content/uploads/2011/10/A-snapshot-of-the-financial-planning-industry-110930-1010version.pdf
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Wed Apr 23, 2014 3:31 pm

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Would you hire a lawyer who also represented the other side?

Why are you doing this with your investment "advisor"?

A great 11 minute explanation of the perils of having a broker/advisor with divided loyaty, or having a fiduciary adviser with an UN-DIVIDED LOYALTY to the client. Difference could be literally millions for the serious investor. http://www.cfainstitute.org/learning/pr ... ultsPage=1

(I found that this link requires a "log in" and not many can do this. If you can, I originally found the podcast on iTunes, in the CFA audio: "What Fiduciary Duty Means to Your Practice" 11:42 2010-01-29 Steve Horan, CFA, interviews Blaine Aikin, CFA

Sorry for not knowing the web link would require a log in......please find it on


This presentation is a very good look at the DUAL loyalties of the average, non-fiduciary, investment advisor, as compared to having an UNDIVIDED loyalty professional.

Ironic thing is, that for those who can afford it, the undivided loyalty is far less costly than being sold retail products, and far less likely you will be double and triple sold (double dip etc).

This group is Canadian and gives some further info about what undivided loyalty looks like, who they are and what they do.

http://www.portfoliomanagement.org/wp-c ... L_WEB1.pdf

Screen Shot 2014-04-23 at 4.31.13 PM.png

http://www.portfoliomanagement.org

best of luck with your investing.
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Apr 22, 2014 9:16 pm

Screen Shot 2014-04-22 at 10.09.23 PM.png


Out dated legal arguments re fiduciary obligations!
Posted on February 26, 2013
Canadian industry submissions on the CSA Best Interests Standards are relying on out dated legal arguments, which were themselves based on no longer relevant service relationships, for determining whether fiduciary duties apply to advisory relationships.


I have argued that the complexity of the process underpinning the relationship imbues the relationship with fiduciary type duties because of the considerable discretion the advisor has over the processes that comprise portfolio construction, planning and management (advice) irrespective of whether the client has the final decision.

A recent 2010 article by Arthur Laby, Professor of Law at Rutgers Schools of Law (US), argues, inter alia, that in the US brokers were only allowed to evade a fiduciary type responsibility in the 1940 Act because their advice was incidental to the transaction. This is no longer the case. As is the case with Canada, advice has become the predominant service activity and the transaction incidental.

“The decision to exclude brokers that provide advice from the Advisers Act may have been appropriate in 1940 when advice was a minor ingredient in the services provided. Today, however, brokers’ functions have changed and advice is more central……

….When a customer turns to a broker for advice, the customer reposes discretion in the broker to provide appropriate guidance and direction. Moreover, the broker has the ability to affect the customer’s legal position, either directly, in the case of a discretionary account, or indirectly, in the case of a non-discretionary account, assuming the customer accepts the advice. The furnishing of advice therefore calls for the imposition of fiduciary duties…..

….These titles imply that the individual is not acting at arm’s length. They are meant to induce a customer to repose trust in the professional as a neutral source of research and recommendations. Because advice is such an important part of a broker’s activity, and because dispensing advice calls for the imposition of fiduciary duties, brokers that give advice should be subject to fiduciary obligations…..

…..Though at one point it may have been appropriate to allow brokers to provide advice incidental to brokerage without the obligations imposed on advisers, the exclusion is no longer applicable because providing investment advice looms as the more significant aspect of a broker’s activity

I have taken some considerable excerpts from the article itself (some noted above) and reproduced them below, but I would recommend reading the entire document.

The following text is taken from – FIDUCIARY OBLIGATIONS OF BROKER-DEALERS, AND INVESTMENT ADVISERS, ARTHUR B. LABY*

http://digitalcommons.law.villanova.edu/vlr/vol55/iss3/6/

or

http://digitalcommons.law.villanova.edu/cgi/viewcontent.cgi?article=1050&context=vlr&sei-redir=1&referer=http%3A%2F%2Fwww.google.com%2Fcse%3Fdomains%3D.villanova.edu%26cx%3D000561345830600848454%253Auqohildtyds%26cof%3DFORID%253A10%26ie%3DUTF-8%26sitesearch%3Dvillanova.edu%26q%3Dfiduciary%26sa%3DGO%2521%26ad%3Dn9%26num%3D10%26rurl%3Dhttp%253A%252F%252Fwww1.villanova.edu%252Fvillanova%252Fsearch.html%253Fdomains%253D.villanova.edu%2526cx%253D000561345830600848454%25253Auqohildtyds%2526cof%253DFORID%25253A10%2526ie%253DUTF-8%2526sitesearch%253Dvillanova.edu%2526q%253Dfiduciary%2526sa%253DGO%252521%26siteurl%3Dhttp%253A%252F%252Fwww1.villanova.edu%252Fvillanova%252Flaw.html#search=%22fiduciary%22

Nature of the Relationship:

Although the differences may be exaggerated, the fiduciary obligation imposed by the Advisers Act appears broader than the duties imposed on brokers through application of the Exchange Act’s antifraud rules and FINRA requirements.

The primary reason for this stems from the way courts and regulators view the scope of activity undertaken by each when administering non-discretionary accounts. As discussed, the duty imposed on an agent depends on the scope of his or her activity.

Although the scope of activity can be altered by contract, in the case of non-discretionary accounts, a broker’s activity generally is limited to conduct surrounding a particular transaction, whereas the scope of an adviser’s activity extends beyond a particular trade. The different scope of activity yields different duties.

Consider the scope of activity undertaken by advisers. In some cases, an adviser might limit its advice to providing a financial plan, or it might restrict its advice to a particularly type of security, such as municipal bonds, or a particular sector, like technology.163 In those cases, the adviser’s fiduciary duty would be commensurate with the scope of the relationship.

Most advisers, according to the Rand Report, however, agree to provide portfolio management services. The phrase “management services” connotes an ongoing relationship, which extends beyond the time a particular trade is made. Moreover, the scope of activity for federally registered advisers is usually to provide ongoing, continuous services, even for a non-discretionary account.

If an adviser has agreed to provide continuous supervisory services, the scope of the adviser’s fiduciary duty entails a continuous, ongoing duty to supervise the client’s account, regardless of whether any trading occurs. This feature of the adviser’s duty, even in a non-discretionary account, contrasts sharply with the duty of a broker administering a non-discretionary account, where no duty to monitor is required. The two accounts in this example are similar in nature—both the broker and the adviser hold themselves out as providing non-discretionary investment advice—yet the adviser’s duty entails ongoing diligence while the broker’s duty is episodic.

……..For non-discretionary accounts, however, brokers’ duties tend to be intermittent, while advisers’ duties tend to be ongoing—extending to dormant periods of inactivity in the customer’s account. During these periods, a typical stockbroker owes no duty to the customer while an adviser acts more like a protective guardian and has a positive duty to act should market conditions or the client’s circumstances call for a change.

…….whether fiduciary duties should be imposed on brokers that provide advice. In 2005, the SEC recognized the importance of this issue, calling for a study regarding whether brokers that provide advice should be subject to fiduciary obligations normally imposed on
advisers. This is precisely the question taken up in the Obama Administration’s 2009 White Paper and in the Dodd-Frank Wall Street Reform Act. Although brokers have always provided advice, that component of their services did not predominate at the time the Advisers Act was passed.

In recent years, however, advice has displaced transaction execution as a chief activity carried out by brokers. It comes as no surprise that today brokers market themselves as financial advisers rather than stockbrokers. This change in emphasis from execution to advice as a primary feature of a broker’s business represents a change in circumstances for the brokerage industry and justifies the imposition of fiduciary duties.

Although brokers historically provided advice to their customers, advice rendered in the past was relatively less significant in the context of the overall relationship than it is today. The Security Market study referenced above explained that in the 1930s, a brokerage firm’s relationship with a customer had four aspects. First, it acted as a broker in the purchase and sale of securities and in borrowing and lending stocks. Second, it acted as a pledgee, lending its own capital to the customer or advancing capital borrowed from banks. Third, it was the custodian of the customer’s cash and securities. Fourth, it exercised, “to some extent,” the function of investment counsel.

The advice component is last on the list and qualified in scope. A history of the Merrill Lynch firm explains that, in the early part of the twentieth century, many brokerage firms did not do much more than execution—their sales forces were primarily intermediaries arranging trades on secondary markets—and the information available to investors seeking advice was rather meager. Open a modern description of the activities of broker-dealers and advice often is paramount.

….primary reason for this shift is technology.209 In the early part of the twentieth century, transaction execution was difficult to accomplish. Today, advances in technology have reduced the time and cost to process trades.210 As a result, the advice component of brokerage business has eclipsed transaction execution in importance. When asked which professional services matter most, survey responders chose retirement planning, investment advising, financial planning, and estate planning over executing stock or mutual fund transactions and other possible responses

Although brokers provided some advice when the Advisers Act was passed, as long as advice was not the primary service offered to investors— that is, as long as the advice was “solely incidental” to brokerage services performed—the broker was excluded from the definition of adviser and the Advisers Act’s fiduciary standard was not imposed.213

The decision to exclude brokers that provide advice from the Advisers Act may have been appropriate in 1940 when advice was a minor ingredient in the services provided. Today, however, brokers’ functions have changed and advice is more central

When a customer turns to a broker for advice, the customer reposes discretion in the broker to provide appropriate guidance and direction. Moreover, the broker has the ability to affect the customer’s legal position, either directly, in the case of a discretionary account, or indirectly, in the case of a non-discretionary account, assuming the customer accepts the advice. The furnishing of advice therefore calls for the imposition of fiduciary duties.

….Because advice has eclipsed execution as the primary service performed by broker-dealers, advice can no longer be considered “solely incidental” to brokerage. Indeed, it is brokerage that appears to be solely incidental to advice. In the 1980s, to better compete with investment advisers, many brokerage firms began to offer financial planning services and shun the title of stockbroker.224 Instead, broker-dealer registered representatives began to label themselves as financial advisors, financial consultants, financial representatives, and investment specialists.

These titles imply that the individual is not acting at arm’s length. They are meant to induce a customer to repose trust in the professional as a neutral source of research and recommendations. Because advice is such an important part of a broker’s activity, and because dispensing advice calls for the imposition of fiduciary duties, brokers that give advice should be subject to fiduciary obligations.

The provision of advice is the type of activity where agency costs are high and, therefore, fiduciary protections are needed most. It can be difficult ex post to determine the wisdom of an investment recommendation at the time it was made. A decision to recommend one investment over another is based on many factors; one can seldom know if self-interest was a motivating force. The imposition of the fiduciary duty of loyalty and the regulation of conflicts are ways to control the risk that an investment recommendation will not be objective.

………….. A fiduciary duty should be imposed on a broker providing advice regardless of the method of compensation employed. Customers who pay commissions need fiduciary protections to guard against opportunism that may arise in any commission-based business.

In the world of securities brokerage, a common risk in a commission-based account is the risk of churning, where a broker makes excessive recommendations.240 Customers who pay an asset-based fee are equally in need of protection.

An asset based fee, although reducing the likelihood of churning, increases the chance that a broker-dealer will ignore a customer’s account—aptly called “reverse churning”—because the firm will be paid regardless of whether a transaction occurs.241 In a fee-based account, regulators are concerned about “opportunism by neglect”—inattention and indifference to the account. Payment of a fixed asset-based fee provides disincentives to monitor, which results in neglected customers who receive little or no advice and seldom trade even when transactions are called for.

Though at one point it may have been appropriate to allow brokers to provide advice incidental to brokerage without the obligations imposed on advisers, the exclusion is no longer applicable because providing investment advice looms as the more significant aspect of a broker’s activity. Moreover, both types of remuneration brokers receive—commissions and asset-based fees—call for the introduction of fiduciary duties



http://blog.moneymanagedproperly.com/?p=2228
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Apr 22, 2014 5:59 pm

640px-Cross_ocean_big_ship_stranded.jpg
The top 3 hidden risks facing all investors today:

(a) fraudulent license misrepresentation by commission salespersons (financial and insurance) as licensed "professionals" with a "professional duty" to protect the customer. By salespeople and investment dealers who falsely imply that they have an undivided loyalty to the customer. This is the biggest risk today.

(b) The capture, or weakening of every regulator or protective agency, when compared to the strength of the financial industry, means that there are virtually none today who can stand, or speak out, about the cheating of the public. The would quickly be unemployed:)

(c) The financial capture of media, to the point where some cannot sustain themselves in business, without pandering to the marketing needs of the financial industry.

The result in Canada, is a river of money, approximately $50 billion a year, or one billion per week, flowing from the hands of all unsuspecting, saving, and investing Canadians, into the hands of giant financial institutions who are fooling and misleading them……"you are richer than...."

I can only imagine what the dollar value of harm might be to American consumers.

It is the greatest social and economic issue that I can see in my field of view today.
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Apr 22, 2014 5:49 pm

From: "\"Help\" <help@sec.gov>" <help@sec.gov>
Subject: Re: SEC Response HO::~00389250~::HO
Date: 22 April, 2014 4:52:28 PM MDT
To: "lelford@shaw.ca" <lelford@shaw.ca>


Let's see if this is more helpful.

An individual may be licensed as a broker (a registered representative), as an investment adviser/or (a investment adviser/or representative) or both. They are often licensed both ways. There are a myriad of "special designations" that require additional and different licensing, and most of those titles include the word "adviser/or" in some capacity. If an investment professional refers to him or herself as an "Advisor" (regardless of the spelling), s/he should be licensed and performing services through a firm that is SEC registered as an investment advisery firm. You may find the explanation on our website a bit clearer. Here's the link to get you started: http://investor.gov/researching-managing-investments/working-brokers-investment-advisers.

I hope that helps. If you still have questions, please feel free to call me at (202) 551-6324.

Sincerely,

Beckie Marquigny




--------------- Original Message ---------------
From: larry elford [lelford@shaw.ca]
Sent: 4/22/2014 4:36 PM
To: help@sec.gov
Cc: lelford@shaw.ca
Subject: Re: SEC Response HO::~00389250~::HO

Thank you for your reply. I am afraid I am a bit dense, and still confused. About: Advisor/adviser/broker names, I am trying to understand, how can brokers call themselves "advisor" without holding the proper advisor or adviser license.

Are they "interchangeable" as stated by SEC Attorney-Advisor" Rebecca Ament Marquigny below in red?

Or are they separate and distinct, words, titles or license's with separate duties and obligations? (the latter is suggested by SEC Chair Mary Jo White in a recent speech that touched on Investor protection. (March 21, 2014 speech to Consumers Federation of America, titled Protecting the Retail Investor)

There is much confusion and enough loopholes in the missing, or varied interpretations, to allow billions of dollars to flow from the hands of retial investors, into the hands of dealers who interpret the words to their favour.

Thanks in advance for helping to clarify the confusion

larry Elford


On 2014-04-22, at 7:00 AM, "\"Help\" <help@sec.gov>" <help@sec.gov> wrote:

lelford@shaw.ca

Dear Mr. Elford:

Thank you for contacting the U.S. Securities and Exchange Commission (SEC) to ask whether there is a difference between financial professionals who use the title "advisor" and those who use "adviser," and whether the titles carry different qualifications or responsibilities. I appreciate the opportunity to respond to your question.

In general, the two terms are used interchangeably, and the choice to use one or the other is simply a matter of preference. However, with some titles, the small differences do carry a distinction. For example, the acronym RIA and the term "Registered Investment Adviser" (or "Advisor") refer to the investment advisery firm or company. The title "Investment Advisor/er Representative" or "Registered Representative" usually refers to the individual person. You can find additional information regarding professional designations on the Financial Industry Regulatory Authority (FINRA) website at http://apps.finra.org/DataDirectory/1/p ... tions.aspx.

I should add one caveat to the response above: I believe the alternative spellings for advisor are not universally synonymous. It is my understanding that British and American financial lexicon differs depending on the formality of the situation. Both terms are acceptable on both continents, but "advisor" is often referred to as "the American spelling."

Thank you for inquiring; please contact us again if we can be of assistance in the future.

Sincerely,

Rebecca Ament Marquigny
Attorney - Advisor
Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
(800) 732-0330
www.SEC.gov
www.Investor.gov
www.twitter.com/SEC_Investor_Ed
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Apr 22, 2014 1:30 pm

31459_550177385004966_1529517751_n.jpg
Stan nails it, and writes very well.

DRAFT for memo to media contacts - Comments?

For some time we have been concerned about Financial Sales Persons using the title Advisor when they are in fact registered as a "Dealing Representive - A sales person" as defined by the CSA document Understanding Registration.

The investment industry regulators seem unwilling or unable to provide adequate investor protection although they claim to provide preventative protection. They are unable to prevent fraud and wrongdoing from happening. It would therefore seem logical that they should provide remedial protection for those victimized by industry fraud and wrongdoing.

We believe one of the fundamental issues resulting in widespread investment loss is the regulators allowing the industry to use misleading titles for persons registered as sales persons. Many ordinary people believe that Adviser and Advisor mean the same thing and the public perception is the same. This results in investors placing their complete trust in a commissioned sales person because they believe he is an Adviser with a fiduciary responsibility. Of course this perception is wrong.

The NRD indicates that most of the so called "Investment Advisers" are registered as a"Dealing Representative". According to the CSA document "Understanding Registration" there are many categories of registration listed including:
"Portfolio Manager"
"Advising Representative" (search here http://www.securities-administrators.ca ... spx?id=850 )
"Dealing Representative - A sales person" (shown here: http://www.securities-administrators.ca ... ion_EN.pdf

The document does not indicate Dealing Representatives can give advice but does indicate other classifications which can.

The question is where can the registration classification "Financial Advisor" or any classification with the word "Advisor" be found?

Are Adviser and Advisor both considered to mean the same and if so why is it not mentioned in the CSA document?

If Adviser and Advisor do not have the same implication then why are "Sales Persons" allowed to call themselves "Advisors"?

We feel that if Advisors are not the same as Advisers then it is at best misleading when sales people use the title Adviser.

It would be greatly appreciated if you would provide comment regarding this issue.


--
Stan I. Buell

OB-DC897_100day_H_20090211195012.jpg


Larry Elford comments:



There is no "definitive" article that I know of, but there is a groundswell of stuff popping up like gophers in spring around here.

I will try not to bury you Andrew, but place a list of links herein, that might help bring you up to speed…..and then you can write the definitive article that spells it out for laypersons to understand.



In some order of importance or credibility………




2 minutes of clarity by SEC chair Mary Jo White found here http://youtu.be/TqBSiR6VwP4 This is the chief source of info on name games.


Should You Go to an Adviser or an Advisor? http://blogs.wsj.com/totalreturn/2012/0 ... n-advisor/

GOOD SEC Study on Investment Advisers and Broker-Dealers http://www.sec.gov/news/studies/2011/913studyfinal.pdf


a few postings and some musings and regulator confused answers on topic here viewtopic.php?f=1&t=10

American Banker Editor nails it here in 7th paragraph titled FINANCIAL ADVISOR CHICANERY http://www.americanbanker.com/bankthink ... 940-1.html

images.jpeg
images.jpeg (5.46 KiB) Viewed 23174 times


SEC’s Lack of Fiduciary Action Is Hurting Investors, Advocates Warn http://www.thinkadvisor.com/2014/04/15/ ... -investors


The Difference Between A Stockbroker, Financial Advisor And Planner Explained http://www.forbes.com/sites/feeonlyplan ... explained/


Financial advisers' credentials mislead seniors, watchdog says http://www.reuters.com/article/2013/04/ ... 2420130418

http://www.sec.gov/answers/invadv.htm

http://secsearch.sec.gov/search?utf8=✓&input-form=advanced&affiliate=secsearch&query=advisor&query-quote=&query-or=&query-not=adviser&filetype=&filter=1&commit=Search


CSA registration categories explained http://www.securities-administrators.ca ... ion_EN.pdf


Larry Elford videos on trying to understand and explain the issue http://youtu.be/wY1qfzzRrgY

Larry Elford videos on trying to understand and explain the issue http://youtu.be/1fIJ08STwDE


Screen Shot 2013-12-14 at 7.20.03 PM.png




Stan, I think we might be getting close to catching regulators in a wilfully blind corner………where on the one hand, if advisors and advisers are "same same", then 150,000 "dealing reps" in Canada are fraudulently misrepresenting themselves to the public as "advisors/advisers" (as something which they are not licensed as)……………..or on the other hand, if they are a totally different title and category of professionalism (as the top experts say), then they are playing ANOTHER misrepresentation game, trying to IMPLY to the public that they are some kind of professional that they are not.

I think they are doing wrong whichever way it gets sliced and diced in the end. Or as Stan so properly puts it at the end of his draft memo for media: "We feel that if Advisors are not the same as Advisers then it is at best misleading when sales people use the title Adviser."

And if the opposite is true, that advisors and ARE the same as advisers then persons licensed as "dealing reps" are misrepresenting themselves to customers as something that they have no license for.
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Apr 22, 2014 8:41 am

945739_194750250673630_2100776849_n.png

Continuing to look at the "advisor/adviser" name game

....confusing, yes. Different answers from nearly every securities regulator. All want to paint it in manner most advantageous as always. If they are different legal terms, THEN those persons who do NOT possess and "advisor" or an "adviser" license should NOT be representing to the public that they do.......simple concept of misrepresentation

Here is another reply, this one from the SEC today:


Dear Mr. Elford:

Thank you for contacting the U.S. Securities and Exchange Commission (SEC) to ask whether there is a difference between financial professionals who use the title "advisor" and those who use "adviser," and whether the titles carry different qualifications or responsibilities. I appreciate the opportunity to respond to your question.

In general, the two terms are used interchangeably, and the choice to use one or the other is simply a matter of preference. However, with some titles, the small differences do carry a distinction. For example, the acronym RIA and the term "Registered Investment Adviser" (or "Advisor") refer to the investment advisery firm or company. The title "Investment Advisor/er Representative" or "Registered Representative" usually refers to the individual person. You can find additional information regarding professional designations on the Financial Industry Regulatory Authority (FINRA) website at http://apps.finra.org/DataDirectory/1/p ... tions.aspx.

I should add one caveat to the response above: I believe the alternative spellings for advisor are not universally synonymous. It is my understanding that British and American financial lexicon differs depending on the formality of the situation. Both terms are acceptable on both continents, but "advisor" is often referred to as "the American spelling."

Thank you for inquiring; please contact us again if we can be of assistance in the future.

Sincerely,

Rebecca Ament Marquigny
Attorney - Advisor
Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
(800) 732-0330
http://www.SEC.gov
http://www.Investor.gov
http://www.twitter.com/SEC_Investor_Ed


Clear as mud now right? Trust a lawyer to make things impossible for human consumption......

If they are different legal terms, THEN those persons who do NOT possess and "advisor" or an "adviser" license should NOT be representing to the public that they do.......simple concept of misrepresentation

However, if Rebecca is right, and the terms are interchangeable, like differently spelled "nouns" as some would say, then those persons who call themselves "advisor" (for which there is no license found in Canada or the USA), are actually representing to the public that they are an "adviser", or trying to. For 600,000 licensed "brokers" in the US, and 150,000 "dealing rep's" in Canada, this is ALSO a misrepresentation. It means every commission sales "broker" or salesperson, or dealing rep, or whatever they are called in whatever country they work, gets to ignore their license, and go by the better sounding "title". Fraud, deceit and false pretence come to mind.

Oh well, salespeople must be salespeople I guess.......always spinning a tale to make a sale........

It is a simple game of watching a salesperson use words and titles, to purport and pretend to customers that he is not a salesperson, but rather some kind of planning professional. The games are amazing to watch, whether in financial sales, or others, dressed up as planning of some kind. It is akin to a door to door salesperson, sticking their foot in the door, so it is not so easily closed, and their opportunity lost.
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Mon Apr 21, 2014 10:50 pm

I have spent quite some time on this issue and yet I do not claim to have it quite figured out.

What I can say with certainty, however is that IF an "advisor" is equivalent to an "adviser", then approximately 150,000 market registrants (in Canada) and 600,000 in the US, are misrepresenting themselves to the public.

Most market registrants do NOT hold the license category (found here http://www.securities-administrators.ca/nrs/nrsearch.aspx?id=850 ) called "advising representative". This is for professional portfolio managers. (like the folks found here http://www.porfoliomanagement.org )

For USA license checks, please see http://brokercheck.finra.org/Search/Search.aspx

My experience in the industry is that "brokers" (salespersons on commission) will do anything to avoid letting the customer think that they are mere commission salespersons, hence the term "advisor" was added to my own business card in 1988, after the crash of 1987. I was at RBC at the time and it was RBC's idea that this "title" would give salespersons a better chance at earning client's trust.

The license held then was called "salesperson" and in 2009 this word was deleted from securities acts in 13 provinces and territories and replaced with a license called a "dealing representative" (aka "salesperson") according to the CSA web site here http://www.securities-administrators.ca/uploadedFiles/General/pdfs/UnderstandingRegistration_EN.pdf .

For 150,000 market registrants to refer to themselves as "advisors", while not having the license, is incorrect, and leads customers into a false sense of trust. They automatically assume that they are dealing with a professional with a fiduciary duty or at least a "do no harm" to the client obligation. This is not true EXCEPT for those small number of professionals who are truly registered as "advisers".

Here is what the editor of American Banker Magazine wrote about it:

Financial Advisor Chicanery: Imagine a two-tiered health care system in which some doctors were legally obligated to do what's right for their patients and others, like snake-oil salesmen of yore, could recommend whatever treatments made them the most money, as long as they didn't kill patients outright. Now imagine that the shysters did all they could to blend in with the real doctors. That's effectively the type of system we have today among the people Americans count on to tell them how to invest their life's savings. Registered investment advisors must, by law, put clients' interests first. Many thousands of other "advisors" at places like Morgan Stanley, Merrill Lynch and smaller shops are held to a much lower "suitability" standard. In essence, even though these people often refer to themselves as "financial advisors" or by some other comfort-inducing title, they're really glorified salesmen. Some do a great job serving their clients. Others don't. It's up to them. Under the law, as long as they avoid putting an 85-year-old widow into an exotic derivative with a 20-year lockup, they're bulletproof. Few clients know this fiduciary-suitability gap exists. The suitability crowd has worked tirelessly to keep the standard low and the distinctions murky. The cost to the public is incalculable but huge. source http://www.americanbanker.com/bankthink ... 940-1.html

Here is how SEC chairman Mary Jo White puts in in just 88 words

http://youtu.be/TqBSiR6VwP4


Gordon, I could go on, but I will stop there, rather than drown you in details. I link a site below where at least three provincial securities commissions disagree with terms as "advisor" and "adviser" being equal terms. An anonymous person at the CSA agrees that they are identical things, as does many a reporter, and I say these people are simply not well informed. Why? Again, if the terms "advisor" and "adviser" are equal under the law, then 150,000 market registrants in Canada, and about 600,000 in the USA are fraudulently misleading clients into a false sense of trust with a license category which they do not possess. Either way, the conversation is coming out, and the size of the issue is huge.

Cheers and best and hoping to hear some rousing discussion, debate and questioning Gordon, and Stan. Lets get to the bottom of this.

Larry Elford

[url]
viewtopic.php?f=1&t=10#p3721[/url]
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sat Mar 29, 2014 7:31 pm

"any advisor bringing in more than $375,000 but less $400,000 in gross production now will earn a flat 20% commission; last year's payout grid offered a 30%-44% payout for the same level of productivity."


Car-salesman.jpg



(if you are generating only $2000 per day at TD, you are facing a pay cut of epic proportions.......achieve or leave:)

If you are dealing with one of these unfortunate folks, calling themselves an advisor.......you are being fooled.

Article (source of the quote at top of page) below:


Changes to the payout grid at TD Wealth PIA add to the trend in which firms are looking to reduce their ranks of lower producers
By Clare O'Hara, Geoff Kirbyson | Mid-November 2013
At first glance, it appears that lower producers are being hit by the changes to the payout grid at TD Wealth Private Investment Advice (PIA). But, upon closer inspection, financial advisors across the board are at risk of seeing compensation dollars disappear.
According to a confidential document from TD Wealth PIA entitled Drive to 100, the threshold for earning income on the low end will rise while the payouts for low producers will drop in the bank's 2014 fiscal year, which began Nov. 1. For example, any advisor bringing in more than $375,000 but less $400,000 in gross production now will earn a flat 20% commission; last year's payout grid offered a 30%-44% payout for the same level of productivity.
That change could translate into some brokers seeing their annual income drop to roughly $70,000 from about $150,000.
"All of a sudden, the bus driver is making more than you and you're taking a lot more risk," says Charlie Spiring, chairman of the Investment Industry Association of Canada and senior vice president of Montreal-based National Bank Financial Ltd. (NBF). "You don't have conventional hours and you have the risk of litigation. It's not worth being a broker [at that kind of salary]."
But it's not just the predicament of "lower" producers at TD Wealth PIA that's raising eyebrows. The firm also has introduced new policies relating to the discounting of fees and advisors' stock-option bonuses known as restricted stock units (RSUs). These changes could affect advisors' take-home bonus regardless of their gross production level, as 40% of the bonus amount is based on hitting new targets. (The old RSU award was 100% based on production.)
To qualify for the first 20% of the bonus amount, an advisor now will have to hit a minimum of 16 closed client referrals a year. Previously, advisors were required to complete two referrals a month, regardless of whether they were closed.
A further 20% of the qualification requirement is now based on the advisor reducing the number of non-profitable households in his/her book. This would include households generating less than $1,000 in annual gross revenue. Advisors' books now will have to hold 70% "profitable" households, by either increasing the activity of the lagging accounts or referring the stagnant accounts to another corporate partner firm, such as TD Canada Trust or a wealth partner.
Many TD Wealth PIA advisors have stock options that are deferred for at least three years — meaning their financial ties to the bank are stronger than some may think. Says Spiring: "Unless they have a competitor willing to offset the loss, [these advisors] aren't going to be walking out the door."
TD Wealth PIA is eliminating its registered-plan fee payout for 2014, which will cut $15-$35 per account for brokers. The firm says it has been successful with its RRSP penetration but there have been some "unintended outcomes" as a result. For example, 60% of the firm's 18,000 single-account households are RRSPs and there is a "heavy concentration" of small and stagnant ones.
"You can no longer look at our grid and think that is what you will get paid," says a TD Wealth PIA advisor in Ontario. "You can't compare us to the rest of the banks because now we have so many moving parts that are all behind the scenes."
Adds a TD Wealth PIA advisor in Western Canada: "It's a bit sneaky of the bank because, for me, it is not represented as a reduction in my grid. But my compensation will certainly change because some of these targets are unattainable."
Also on the table is a new fee-based household discount policy that came into effect Nov. 1. Previously, an advisor could discount a client fee without any repercussions. Now, for all new fee-based accounts, advisors who discount commissions below the firm's recommended minimum will see their payout drop by 5%-15%. The confidential document says that the change is to encourage advisors to price their fees based on their value proposition and reduce discounting within their practices.
TD Wealth PIA has also boosted the minimum amount for advisors to discount a client commission for equities trades to $400 from $300 — also in hopes of reducing widespread equities discounting that's happening at the firm.
"What they're doing is punishing the advisor for doing [a] client a favour," says a TD Wealth PIA advisor in Ontario. "At some point, if you have to charge the full price to clients, you are going to end up having a conversation with them about the discount brokerage, where the bank will make $9.99 on the trade. It doesn't make sense."
Dave Kelly, TD Wealth PIA's president and national sales manager, declined to comment on the compensation changes.
Ongoing uncertainty in the investment community is persuading many clients to stay on the sidelines, Spiring says, and the resulting decline in revenue for brokerages conflicts with the need for higher profits.
"Most of the firms aren't making their regular margins on wealth, and one of the ways to achieve that is to lower broker payouts," Spiring says. "Is it fair if you're a smaller broker? Of course not. But shareholders demand firms achieve regular margins. [And cutting payouts to the lower-end brokers] has become the easiest solution.
"Top-end brokers have a lot of loud voices and are desired all over the Street," he adds. "Lower-end and medium-producing brokers are more vulnerable."
Spiring has been advocating for banks to rethink their options for widening their margins. At NBF, he has advised his team to consider dropping the level of gross production to $300,000 and start recruiting advi-sors who fall in the mid-tier category and who bring in "good-quality business."
Spiring is worried that there will be fewer brokers at small and medium-sized firms in the future — and that doesn't bode well in an industry in which the average broker's age is already high: "One day, we're going to need someone to take [the books of retiring brokers] over. I'd like to have a well-trained, medium-sized broker take it over rather than a rookie who [needs] time to learn."
TD Wealth PIA is not alone in addressing lower-end producers. Last year, Toronto-based Canaccord Genuity Group Inc. eliminated 35 advisory teams that it labelled as "underperformers" from its total of 180 such teams. And Toronto-based Raymond James Ltd. cut its grid for advisors making less than $400,000. Still, Raymond James added a number of mid-tier levels for in-house advisors making $175,000-$400,000 to encourage an increase in production. The lowest tier (for $175,000 gross production) dropped to a payout of 15% from 20%.
"I really commend Raymond James on this model," Spiring says, "because I think [it has] done a good job at starting to address the problem."
Three years ago, Toronto-based ScotiaMcLeod Inc. followed a similar strategy, introducing a "developmental" grid for junior advisors to hit specific targets. The firm also changed its bonus compensation structure to move the focus from bank referrals and toward new external asset growth, says Hamish Angus, head of ScotiaMcLeod.
Both ScotiaMcLeod's and NBF's grids have minimum thresholds at the lower end of the scale to escape the lowest commissions — NBF's threshold is $350,000; ScotiaMcLeod's, $350,000-$375,000. In contrast, Toronto-based RBC Dominion Securities Inc.'s threshold is at the top end at $500,000.
TD Wealth PIA's Drive to 100 report lists several key drivers for the investment dealer's future, including evolving to be a "premium price" firm, encouraging productive and profitable behaviour among advi-sors, and attaining industry average pretax profit margin by the end of 2015 and industry-leading pretax profit margin two years later. Says the report: "We want your practices, on average over time, to grow faster and be more productive and more profitable than our competition."
Dan Richards, founder and CEO of Toronto-based Clientinsights, believes increased regulatory oversight for financial advisors is one of the primary causes behind the brokerages' desire to reduce expenses. "These are fixed costs, regardless of book size," he says. "If you're an advisor at a bank-owned firm and you're producing at a threshold that the bank cuts the payouts on, they aren't that interested in having you around."
The commission cuts leave many affected brokers with a trio of options: accept the significant (about 50%) pay cut; move to a smaller firm with a higher payout grid; or become an associate on another advisor's team at your existing firm. (Richards doesn't believe the brokerages would want to move lower-producing advisors into bank branches.)
"You take your book," Richards continues, "meld it onto the book of a bigger advisor and, if the payout is twice as high on that bigger producer, you've doubled the total payout. All firms want advi-sors to focus on bigger clients, and one way to do that is [by] having bigger teams."
Unfortunately for many advi-sors at bank-owned dealers, the option of teaming up to hit targets is not allowed.
"It's a missed opportunity, in my mind," says Spiring, who had several mid-tier producers join forces when he was CEO of Winnipeg-based Wellington West Holdings Inc. "There are ways to make this strategy work. And, at Wellington West, it certainly helped us get the business." [NBF acquired Wellington West in 2011.]
Instead, the new grids also could lead to bad trading decisions, says one bank-owned brokerage executive who asked not to be named. Advisors who may be close to hitting the next pay scale, the executive says, could start to display behaviour that's not in the best interest of clients or the industry in order to reach that target. IE

http://www.investmentexecutive.com/arti ... Mode=print

This video tells of a real game of consumer misrepresentation around "advisor": 2 minutes http://www.youtube.com/watch?v=1fIJ08ST ... AQ&index=3

Screen Shot 2014-03-29 at 9.03.37 PM.png
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