advisor fraud, professionals, or salespeople masquerading?

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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Wed Mar 26, 2014 5:09 pm

further to the consumer misrepresentation of allowing commission investment sellers misrepresent themselves with a title for which no license, no duty of care to the public, exists:

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click to enlarge image, click twice to zoom in

Dear Mr. Elford:

Thank you for your inquiry to the Ontario Securities Commission (OSC) concerning checking registration for your adviser.

When you refer to "check your adviser" day on March 19, 2014, I believe you are referring to "Check Registration Day". Here is the link to information about this day on the OSC's website: ... eg-day.htm.

"Adviser" is a legal term under securities law that describes a company or individual who is registered to give advice about securities. "Advisor" is not a legal term under securities law.

Investors often refer to the person or firm who provides an investing service to them as their "adviser" or "broker", and this is a common term used in a generic, not legal way. Business titles, designations for courses completed, and professional memberships may be informative, but the important facts for any investor are to know what the person's registration is, what products they are permitted to trade or advise about, and the services they are allowed to provide. It is important to check with the relevant provincial securities regulator to ensure that the individual and company you are dealing with is registered to trade or advise in securities, if that is part of what they are doing.

This link: https://www.securities-administrators.c ... 1128#tools on the Canadian Securities Administrator's (CSA) website provides information about checking registration. You may also find this link to Understanding Registration useful, as it describes the different categories of registration and what they mean: https://www.securities-administrators.c ... ion_EN.pdf.

Since securities law is regulated provincially, if you have specific questions about a company or individual through which you are considering investing, you may wish to check with the securities regulator in your jurisdiction for more information.


Nicole Plotkin
Senior Inquiries Officer
Ontario Securities Commission
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Wed Mar 12, 2014 12:03 pm

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(important enough to repeat)
“Advisor” spelled with an “O”, verses “adviser” spelled with an “E”

What if it (gaining instant credibility and earning customer’s trust) were as simple as using a title on your business card which looks, sounds and can be confused with a professional license designation?

On this basis, ladies and gentlemen, I am pleased to announce that I am a now a “Docter”. Not very impressive? It seems that most people can spot a miss-spelled Doctor.

OK, how about I am now an “advisor?” Better? Yes. The public does not know that the early laws on the books (Investment Adviser Act of 1940 USA) use the spelling of adviser with an “E”.

Today, you might find most advisor’s using a different spelling, that with an “O”. You may also learn that often this is the telltale sign that they do NOT possess the license, the duty of professional care (buyer beware) nor the proper incentives to precent putting your money in a conflict of interest with their interests. End result is that you lose, while you feel like you are being “helped” by a professional. Welcome to the difference between “fraud” and “theft”. Or as one victim puts at the end of every email she now sends out as a warning to others, “Fraud, is theft committed with a smile, and trust is the weapon used.” ... n-advisor/

(Jason Zweig article) By JASON ZWEIG

Associated Press The New York Stock Exchange
Long ago, investors bought stocks from “customer’s men,” who then became “registered representatives,” who in turn morphed into “investment adviser representatives.” Financial planners, meanwhile, became “financial advisers” and even “wealth managers.”

Much like garbagemen rechristening themselves “sanitation engineers,” the folks who flog investments are tweaking their titles to make what they do seem fancier and more impressive than it is.

Stockbrokers and financial planners alike have been migrating, en masse, from the word “adviser” to the alternative, subtly-more-impressive spelling advisor. (When you type advisor in WordPress, as I just did, the software underlines it with red sawteeth, signaling that the word is misspelled. Most dictionaries say either spelling is acceptable.)

What’s remarkable about this is that the federal law that regulates the provision of financial advice is called the Investment Advisers Act of 1940, with an “E,” not an “O.” Both the Securities and Exchange Commission and the Financial Industry Regulatory Authority, which oversee how investments are sold to the public, call someone who gives financial advice an “adviser” – not an “advisor.”

Why, in a regulated industry, would you choose to be called something other than what the law that regulates you calls you?

Lexicographer Barry Popik tells me that a search of the Library of Congress’s site, Chronicling America, for the years 1836 to 1922 shows that the word “advisers” returns 875,830 hits, versus just 21,145 for “advisors.”

And the Corpus of Contemporary English, reports Popik, shows more than 5,200 citations for “advisers” but just under 2,000 for “advisors.”

On the other hand, search now at the U.S. Patent and Trademark Office and you will find more than 3,800 companies with “Advisors” in their name, vs. well under 300 that call themselves “Advisers.”

So, it seems, the written language overall has long appeared to favor “adviser” over “advisor,” but financial companies have a strong preference for calling themselves advisors.


There may be something about the “-or” suffix that lends it more gravitas than “-er.” A donor seems, somehow, more generous than a giver. An author is more dignified than a writer. An orator is more eloquent than a lecturer or speaker. When real-estate agents invented a moniker for themselves, they chose to become Realtors, not Realters.

Plus, if you are working on a master’s or doctorate, you will have an advisor for your thesis or dissertation, not an adviser. Many financial advisers crave the same kind of intellectual respectability – and marketability – that graduate degrees confer, which helps explain why they often collect professional designations enabling them to festoon their names with sets of initials.

We’ll know the field of financial advice has finally arrived as a profession when its practitioners accept how the law of the land says they should spell what they do – and when they stop trying to gussy it up with a spelling gimmick.

related links:

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In the US, check your "advisor's" true license at
In Canada, search ... spx?id=850

(and PLEASE, do not do as the industry apologists "advise". Do not merely "see of your advisor is registered". That is a ruse. Of course they are registered, they have all taken the 30 day correspondence course, and all have gotten over 60% on the multiple choice be come a "seller of financial products offered by their dealer."

If that is all you require, a seller of financial products offered by their dealer, then your search is over. If, however, you seek a financial professional, one whom you feel you can trust (not just one who pretends to like you:) and one who has a professional obligation to forgo his or her loyalty to themselves and their firm, and instead offer an undiluted loyalty to the customer. Read the old definitions of a "fiduciary", "trustee" and the like, if you can, and see what it takes to answer the question every investor asks me, "how do I find someone I can trust to help me manage my money?"

A licensed professional, WITH a written fiduciary duty is an everyday, simple, and lowest cost option in the world of professional money management. Problem is, that 300 million Americans, and 30 million Canadians are stuck in an ocean of "retail" investment "advisor's", which unfortunately for them is like going to a "Docter"........

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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Mar 04, 2014 9:59 am

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Seriously? Your investment seller can fool millions of people out of billions of dollars by changing the "e" in "adviser", to an "o" and get away with fraudulent misrepresentation?? Banks and brokers are playing "GOTCHA" with you ... n-advisor/

This video by a recovering broker (me:) tells a story of how 330 million north americans are misrepresented, then cheated and shortchanged.......all by persons who fooled us into a belief that they were the "professionals". Fool me once, shame on........... ... re&index=2

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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sun Mar 02, 2014 7:36 pm

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some excerpts (all USA based, but similar rules in Canada)
"A broker-dealer is excluded from the IAA's defmition of "investment adviser" only if both (1) his performance of advisory services is "solely incidental to the conduct of his business as a broker or dealer" and (2) he receives "no special compensation" for his services.10" (second para, page 33)

"the SEC acknowledged a further blurring of the distinction between full-service broker-dealers and investment advisers,18 and the attendant investor confusion. It was also aware of abuses by brokerage firms in marketing fee-based accounts.19 SEC Commissioner Cynthia A. Glassman recognized that "investor confusion about the obligations their financial service provider owes to them" was widespread.20" second para, page 34

"outline the salient differences in the legal obligations that brokers, on the one hand, and investment advisers, on the other, owe to their customers." (first line page 35)

"Thus, the core function of a broker- dealer is executing transactions for customers;"
"When making a recommendation to purchase a security, broker- dealers have obligations to make only recommendations that are suitable for the customer, based on the customer's financial situation and financialobjectives.28 In addition, broker-dealers may be liable for fraud or negligence if a customer asks their advice about selling or holding a security, and the information provided is false or misleading.29 A broker-dealer's relationship with his customers is not, however, generally considered a fiduciary one, unless the broker exercises investment discretion over the customer's account.30" page 36

"Courts, however, have not held fIrms liable for failing to disclose that the fIrm's compensation system may give account executives incentives to sell particular securities." page 37

"According to the Supreme Court, the basic function of an investment adviser is "furnishing to clients on a personal basis competent, unbiased and continuous advice regarding the sound management of their investments.,,39 It is well established that the relationship between an investment adviser and his customer is a fiduciary one.40" page 38, first para

"the fiduciary's obligation of undivided loyalty to the client" page 39

""Financial planner" is not defined in the federal secuntIes laws," page 39

"if broker-dealers are allowed to hold themselves out as "fmancial advisers" or "financial consultants" in order to sell their services, their legal obligations should be commensurate with those of investment advisers. Courts and arbitrators131 should deem it misleading for broker-dealers to hold themselves out as being advisers without accepting the legal responsibilities attendant to that title. In disputes between customers and broker-dealers, a customer should be permitted to introduce as evidence the firm's advertising and explain how it affected his understanding of his relationship with his broker. In turn, the firm or registered representative will have an opportunity to demonstrate that they made it clear to the customer that the registered representative was a salesperson and did not owe a fiduciary duty to the customer. The judge or the arbitrator should carefully consider the evidence presented by both sides and make an assessment of the likely impact of the firm's advertising on the customer's understanding and expectations about his relationship with his broker-dealer." Pages 54, 55

"Specifically, if the advertising created a reasonable expectation that the broker-dealer was more than a salesperson, then it should be responsible for monitoring the customers' accounts and providing updated information so that the customer and broker together can reevaluate the customer's financial situation in light o f changing market conditions - j u s t as the advertisements promise." page 55

The author is very well informed and educated about securities regulation, as well as practices in the industry. I agree with her findings and point out my own briefly, that the great danger illustrated here is that the rules become unclear, or behind the times, or simply "not enforced" by regulators captured by industry. This allows the largest consumer "bait and switch" operation in the world (in my experience) to continue, namely the intentional misrepresentation and fooling of consumers that they are agreeing to accept advice from a trusted and trained financial professional, while in fact they are being duped and lured into a relationship with a mere commission broker or salesperson. This is the basis for fraud since the customer is being delivered something entirely different than what they were led to believe.

video illustration of this Investment Industry Bait and Switch from the experience of twenty year broker: ... re&index=2
source document here: ... t=fac_pubs

or ... sp=sharing

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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Wed Jan 08, 2014 3:03 pm

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I am just going through this key note address. I will be blogging about this in greater depth, but I thought it would be useful to note some interesting statistics and one key observation:

Use of the word advisor/adviser – 0 times

Use of the word salesperson – 5 times

Use of the word intermediaries – 7 times.

It seems to me that the heart of the matter, as far as this key note address is concerned, is the differing view over the roles of advisors and the representation of that role. Bill Rice views the role as one of salesperson and intermediary. If the role was clearly one of pure intermediation, then I would agree with him, but it is not.

This speech betrays an alarming level of ignorance, within the corridors of our country’s regulators, as to what is happening in the financial services industry.


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Good Morning. Thank you for the introduction.
Balanced Regulation
Acknowledging the obvious tension between regulators and the regulated, I would like to start by repeating the familiar regulators’ message that we are all on the same side, endeavouring to reach the same fundamental goals. Securities regulators are responsible to protect investors and the integrity of the capital markets. Efficient capital markets permit investment on a level playing field and access to capital by business enterprises. Intermediaries between investors and securities issuers have a significant role to play in both protecting investors and protecting the integrity of the capital markets. It is important to securities regulators that intermediaries are as effective as possible and, in that regard, that they be as skilled and experienced as possible, and are motivated by incentives to do as good a job as possible. What is good in the long run for their business ought to be as well good for the capital markets.
The trick behind effective regulation is always balance. We, the regulators, are often criticized for being, by intention, too protective of investors, in which case the regulatory burden risks smothering the activities of issuers and intermediaries. Alternatively, we are accused of being too supportive of the issuer and intermediary industries, in which case investors are subjected to inappropriate risks and possibly dissuaded from participating in the capital markets altogether. There may well be imbalances in our regulation, but they are not by intention. There is little upside to issuers if investors are frightened away, and there is little benefit to investors if issuers leave the capital markets, or the intermediaries they rely on
abandon their businesses, and there are as a result no investments or no advice to be had.
With an appreciation that all of investors, market participants and regulators have the same fundamental goals in mind and that the rules, compliance with the rules and rigorous enforcement of the rules are essential ingredients for the achievement of those common fundamental goals, how do we get the balance right?
I wish I had the simple answer. I wish I could say when I am invited to speak to a group such as this in Toronto that we in Alberta have it all figured out, you should do things this way or that and you will both find and maintain the desired regulatory balance. In considering this address this morning I did develop and articulate in my own mind some novel ideas to project by way of answers and directions that would be helpful to all of you and for which you would presumably be grateful. I had the good sense to test some of these ideas on our ASC staff who flattered me for my vision but pointed out inconvenient facts and realities that stand in the way of that vision. In the area of market conduct regulation there are not easily identified means to balanced regulation, at least not that is balanced for all issuers, all investors, all market facilities and all intermediaries. And furthermore, if the balance is reached one day it is likely lost the next as a result of changes to economies, businesses, market cycles, new products, new marketplaces, international influences and, in recent years very significantly, new technology.
We, the regulators, do hear one message, loud and clear, from many in the investment industry that the regulatory burden is becoming unbearable because of its cost, its resource demands, its complication and its volume. We hear that small and medium-sized dealers cannot continue to bear the regulatory burden and that as a consequence only the major institutions will remain. Those are not satisfying messages to hear and are certainly not consequences intended by securities regulators. Those are not consequences that I would judge best serve investors or the capital markets, never mind the investment community.
So are there ways to lessen the burden of securities regulation on the investment industry without sacrificing or diluting the undertaking of our regulatory mandate to protect investors and the integrity of the capital markets?
It is at this point that I must resort to the common regulator’s disclaimer: my comments are my own and not those of the CSA or the ASC. Some of my own thinking does reflect that of the ASC, but certainly not all of these matters have been thoroughly researched, analyzed and decided upon. Some of the positions of the ASC may influence policy selections by the CSA, but that has yet to be determined. So my comments inform you only as to one individual regulator’s personal and rather high level attitudes and inclinations that may possibly influence changes of approach to national policy making.
Enforcement over Compliance
One policy re-alignment that could shift some of the burden would be for securities regulators to focus less on rule making and compliance and more on enforcement. If we focused less on exact compliance with detailed rules and more on offensive breaches of important fundamental standards, might everyone be better served and less time devoted to detailed and voluminous analysis of both the rules and related conduct?
The investment industry in Canada has long advocated for a principles- based approach to regulation, and the concept I am discussing is closely related. One concern has been that participants in the industry may lack the experience and judgement to fully understand what the principles are and what conduct supports or contravenes them. Another concern is that our system of due process, adjudication and sanction is based on the clarity of rules and the clarity of evidence of their alleged breach. A number of relevant questions arise. Are regulators prepared to accept that judgements as to compliance with principles can be made fairly by firms and individuals? Are compliance officers prepared to take responsibility for making those judgments in the absence of detailed rules? And would it be acceptable to participants who contravene the principles that they be dealt with severely under regulatory enforcement proceedings?
I do not believe that a principles-based regime can work effectively unless there is the prospect of serious consequences for a breach of the principles. Could participants in the industry accept that a response of “I didn’t know” and “you can’t point to a specific rule and breach” would not be acceptable defences? And just as regulators would have to trust the
judgements of firms and individuals to a greater degree in the absence of detailed rules, would firms and individuals be prepared to accept the greater judgement-making that will be required of regulators in selecting the conduct that is deserving of serious sanction and based on the breach of general principles instead of detailed rules? If small and mid-sized dealers struggle to keep up with the flood of changing rules and the related compliance obligations, would they actually be any better equipped to understand, apply and follow principles?
So would less of a focus on specific compliance and more of a focus on serious enforcement shift some of the cost and resource burden from compliance officers to regulatory enforcement officials?
Principles-based regulation was very fashionable during a period leading up to 2008, and was led by the U.K.’s Financial Services Authority. Senior officers of the FSA were touring various western countries explaining and promoting the advantages of principles-based regulation and, in respect of implementation in the U.K., its huge success. That all changed with the collapse of Northern Rock and all that came thereafter. Principles-based regulation fell immediately out of favour and the model of its successful implementation, the U.K. FSA, has been restructured. The British Columbia Securities Commission was a strong proponent of the approach, but has also fell silent on the subject since 2008.
It may be time to look again at the approach in the Canadian context and see if there are features that could help in a practical way better control the regulatory burden.
If the regulatory burden is in fact becoming overwhelming because of volume and complexity, could regulation be reduced and simplified through a more principles-based approach? Are both participants and regulators prepared to trust each other to make the judgements required for the successful implementation of this approach? And are participants prepared to accept the tougher enforcement consequences that would be necessary to support the maintenance of the principles?
United States Influence
There is a natural tendency in Canada to replicate the regulatory regimes of the United States. There are good reasons for this, including: the desire to harmonize our regulatory environments to the greatest degree possible with our closest trading and business partner, and the fear that a regulatory regime perceived to be less rigorous than that of the U.S. would be judged to be sub-standard, weak and lacking in integrity.
The downside of following the U.S. lead in regulation is that their habit is to be voluminous, detailed and prescriptive. Even though their economies of size can better accommodate the resources required to respond to their prescriptive regulation, they as well are endeavouring to reduce the negative influences of the U.S. regulatory burden. The JOBS Act presented a good example of efforts by the U.S. Congress to lighten the ever-growing burden of U.S. securities regulation and the negative impacts it may be having on capital raising, business growth and job creation.
Irrelevant Problem Fixing
As more time passes since the 2008 financial crisis, there is greater realization that legislators and regulators are spending great amounts of time and energy fixing the prior decade's problems and may be loading up the regulatory burden more for the purpose of optics than for impact. That challenge is compounded in Canada where we may not only be trying to fix yesterday's problems, but we may be trying to fix problems that existed elsewhere, and not in Canada.
Defaults, questionable conduct and other problems observed among the biggest financial institutions in the world have truly shaken the trust that governments, regulators and the public have in the financial system and financial institutions. The revelations of bad investment products being sold to clients, huge trading losses being recorded by relatively junior employees and the alleged manipulation of reference interest rates and foreign exchange conversions has devastated the fundamental sense of trust that is necessary for the efficient working of financial markets.
Nevertheless, we must fully understand the circumstance of that offensive conduct and determine its relevance to the Canadian capital markets before mimicking the regulatory regimes of others. One cannot assume that Canada is immune from the problems that arose in the U.S., the U.K. and Europe and we need to be vigilant; but do we need to replicate every change that is introduced in the U.S. when our financial institutions have not been confronted by the same damaging revelations the Canadian financial system demonstrated comparative integrity?
Should Canada be now prepared to be different for the reasons that we can be without undertaking undue risk and that we need to be in order to avoid the cost, delay and distraction that regimes developed in the U.S. would impose? Should we all, regulators and the regulated, be spending more time trying to apply an effective but less burdensome regime in order that we would all spend less time dealing with the long term costs of a more burdensome regime? To successfully undertake that approach, we need confidence to make our own choices and a preparedness to defend and explain those choices.
Fiduciary Standard
A debate is ongoing in Canada concerning the imposition of a fiduciary, or as the regulators have preferred to call it, a best-interest standard by which to manage and judge the relationship and conduct between a securities salesperson and a client. Being careful to emphasize that I am speaking personally and not on behalf of others, I will say that I am not certain that this debate would be ongoing in Canada but for the focus given the subject in the United States. This issue is an example, in my view, of what we inherit from our neighbours to the south when we might not have seen the necessity or even purpose to address it on our own.
I cannot argue that the implementation of the fiduciary or best-interest standard does not, on its face, provide for an elevated standard for the benefit of an investor client. I also acknowledge that many investor clients have been under the impression that they were already the beneficiaries of this elevated standard. I further acknowledge that many salespersons already behave in a manner that would demonstrate compliance with this
elevated standard. The question for me is whether we really need to create, define, implement and enforce an entirely new standard of conduct for the investment industry. I believe that the existing standards of suitability and know-your-client are very good standards. From my post as Chair of the ASC I do not observe that we have problems arising between salesperson and client because of our current standards, but we have problems because in too many cases the existing standards, on the part of the investor, are often not understood and, on the part of the salesperson, are often not abided by.
If we as regulators could be comforted that the suitability and know-your- client standards were being universally and rigorously applied, I do not believe we would need to be canvassing the application of a wholly new standard. The issue cannot only be whether or not a new policy could better protect investors. We must also consider the practical implications of a new policy and its impact on the balance we are attempting to achieve. Might we be saving a lot of time, energy and grief by bettering the compliance with our existing standards rather than trying to adopt an entirely new one. Is it necessary? Will it distort the balance we strive for?
If I were personally to be thoroughly persuaded by industry that a new standard was not required, it would not be through some exhaustive comparison and argument concerning the merits, but rather through evidence that the industry was working hard and effectively to instruct and police the unwavering application of the suitability and know-your-client standards. This evidence must come from an understanding of the communication between the salesperson and the client and the level of
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appreciation had by the client for the communication. It cannot be based on the form, content and execution of forms.
Form over Content
Lengthy, complex, unread forms provide a paper trail of evidence that can be used for the purposes of litigation defence, but it is not likely they serve the purpose of informing the client of the relationship had with the dealer, or of ensuring that the standards of suitability and know-your-client are being satisfied in substance and not simply in form. I think it is encumbant on regulators, compliance officers, dealers and their respective legal counsel to lessen the reliance on forms and find ways to ensure application of the substance of the standards. If the means cannot be found to break out of our collective attachment to the comfort provided by drawers full of executed forms, I do not know that we have any chance at providing for a made in Canada principles-based regulatory regime for the investment industry.
I have suggested that if the standards of suitability and know-your-client would be fully and meticulously followed we would not need to be considering the establishment of an entirely new standard and trying to address all of the complications that would entail. I would make a similar comment, again personally, around the subject of disclosure. Our securities regulatory regime in Canada is fundamentally built around the concepts of full, true and plain disclosure and the consequential ability of an investor to make an informed decision. These informed decisions by
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investors do not relate only to the securities they purchase and sell but also to the roles, expertise, duties and costs of the intermediaries they engage.
I can accept the position that an investor must take significant responsibility for his or her investment decisions, but I cannot accept that there be any lack of understanding on the part of an investor when making those decisions as to the role, expertise, duties and costs of those they are paying to serve as intermediaries in their purchase and sale transactions.
From the standpoint of a regulator, I can say that as confidence in the level of disclosure lessens, the inclination to intervene in the substantive features of the relationship increases. Simply put, if we cannot be comfortable that investors know what they are paying, and what they are paying for, we regulators will be tempted to intervene not only in respect of the disclosure deficiency, but also in respect of the costs themselves. One can be persuaded from a regulatory policy standpoint that investors should be responsible for making their own choices as influenced by the subject of cost, but it is very difficult to take that position when it appears they are not being fully or effectively informed as to what those costs are.
Technology Impact
We as regulators are receiving much comment from the small and medium sized dealer community, in particular, about the negative impact of technological changes in trading mechanics. Removed from the day-to-day and transaction-by-transaction experience, regulators around the globe are struggling to understand the features, mechanics, impact and consequences of matters such as, among other things, high frequency
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trading and dark pools. Regulators around the world are challenged by the same questions as we here in Canada. Is liquidity increased, decreased or affected at all? Are technological changes the result of ever-evolving marketplace mechanics that cannot be stopped, or do they represent an abuse of position and strength by those who can afford to take advantage of that evolution at the expense of those who are necessary players in the market but cannot afford to keep up? Are some of these practices designed to gain informational advantage or do they cross the line into market manipulation.
Regulators are working hard to understand these issues and the facts relevant to them. I believe it will take time to achieve that understanding and more time to react to it, if at all. We all wish there were quick and ready answers, but I am afraid both knowledge accumulation and appropriate responses will take more time than many would like. As in most areas of our regulatory responsibilities, your contribution to better and more quickly informing us will be helpful for all concerned.
Self Regulation
When I interviewed for the position as Chair and CEO of the Alberta Securities Commission now close to nine years ago, I was asked about my views on self-regulation. Being a lawyer and having enjoyed the privilege of the self-regulation of the legal profession for some 32 years, I did not have much difficulty in quickly expressing my support. Not long after taking the job and in speaking publicly in Alberta about the effective enforcement of securities laws, I made a plea to Alberta market participants to do much more of the job themselves. I was being surprised by comments from
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people who had read of our ASC enforcement efforts that it was about time we had cracked down on so-and-so or that they were certainly not surprised to see that so-and-so was now the subject of an allegation, a hearing or a sanction. I took to wondering out loud why these so-and-so’s had not been brought to our attention at the ASC long before or had not been effectively discarded by other legitimate players in our capital market.
I am still a believer in the self-regulatory system, but do worry about some lack of alignment between the “self” in the industry and the “self” in the regulators. I am also of the view that more could be done by peers to clear out bad actors and bad behaviours.
It has been something of an eye opener for me that some of the strongest critics of the investment industry, its practices and its people, come from those who have spent a career in the industry and have moved on or retired. Some of those critics have from time to time, joined the ASC as members of our Commission. Their views come with credibility and can be persuasive.
Another observation is that the vast majority of complaints that come into our organization about market conduct comes from unhappy investors. Very rarely do these complaints or reports originate with industry members. That experience may be different for IIROC or the MFDA, who are more directly engaged with the industry, and it may be that I am overstating the concern, but it occurs to me that a much greater degree of self-policing would go a long way to reducing regulator burden. It is not just that the regulators might have less work to do in the enforcement area if industry
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was doing more of its own culling, but there might be far less need for prescriptive rule making and standard setting if it was observed that problem areas were being dealt with by the peers of those who do not meet standards.
Related to that issue is a sense that there is a “we” and a “them” comprised of the self-regulator and the self-regulated. I would personally prefer to believe that within these groups of “selves” everyone is on the same page, in that everyone will benefit from improved regulations for good service and integrity and from less intrusion by those outside of industry. This is another personal opinion that will not be shared by all of us within the regulatory community, but I am of the view that self-regulation ought to be truly self-regulation and not some hybrid or diluted version. To the degree there is less and less “self” in the model, the argument strengthens for someone wholly independent of industry to do the job, like provincial securities regulators.
In case my comments have raised any questions about the nature of the relationship between IIROC and the provincial securities regulators, it is my own observation that the relationships are good, there is mutual reliance and respect and a sense we are all trying to do our jobs as well as possible for common goals.
I read the other day in our consolidation of media reports that a senior regulator in the U.S. had commented that recent problems, particularly in the banking industry, had raised serious concerns about the culture of
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behaviour within financial institutions and the general appreciation, or lack of it, for the value of ethical behaviour. This comment struck me as coming rather late in the day. I think these concerns arose pretty soon following the mess created in 2008 and have been repeated often since. It may be that some of the most recent attention to these questions of ethical leadership and tone at the top was spurred by the realization that the most recent episodes of questionable conduct in FX trading had been undertaken after all the alarms had already been sounded about sub-prime mortgages, credit default swaps and rate setting, among other things.
It is to be hoped that the job of compliance officers within financial institutions includes contributing to an atmosphere of compliance, an assumption that ethical behaviour is a fundamental expectation that permits no exceptions and an understanding that there is no place for people who would hold, profess or practice a contrary view. In the end, peer pressure and internal discipline will be more effective than increased regulatory demands. Evidence of significant levels of peer pressure and internal discipline may go some distance to fending off the inclinations of regulators to regulate. To repeat the old saw that “if you are a hammer, every problem is a nail”, it should be acknowledged that regulators have only two basic choices: to regulate or not to regulate.
A subject closely related to compliance is dispute resolution. Securities regulators do not want, and are not resourced, to get into the business of dispute resolution and compensation for the clients of registrants. OBSI, the Ombudsman for Banking Services and Investment, provides what has
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been intended as an inexpensive and prompt service for the resolution of disputes between an investment dealer and a client based on the alleged failure of the investment dealer to comply with appropriate standards or practices. It has been a frustration for many that what ought to be an ideal service for all concerned has encountered so many obstacles to full satisfaction. I hope that we can move past them. Investors have much to gain from the process, provided it works as intended; industry has much to gain from a reputational standpoint; and regulators have much to gain from a system that provides remedies we are not responsible for, but are nevertheless demanded of us.
As personal observations, it is to be hoped that investors can accept that OBSI provides a dispute resolution process and is not intended to identify and either correct or report every deficiency observed in the practices of the subject financial institution. It is to be hoped that OBSI can accept the responsibility to address matters within as short a timeframe as possible and recognize that undue delays detract from the value of the process in its entirety. It is to be hoped that investment dealers can appreciate the relatively inexpensive nature of the process and its rewards, and can accept an outsider’s evaluation of fault. I think that if investors want to squeeze every last nickel of potential compensation, they will have to resort to the courts. I do not believe it reasonable to expect an institution to accept an independent dispute resolver if that dispute resolver is also responsible to report on and address systemic issues observed in its process.
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I would also advocate that internal compliance staff and fault evaluators should be a little better prepared to accept the opinion of an outside dispute resolution service, even when their opinion is at odds with the very good and well-intentioned opinion formed internally. Falling back on my experience as a lawyer, I would say that litigation lawyers would become suicidal if they viewed every contrary decision by a judge to be a questioning of their integrity, professional ability or entitlement to be paid by their client.
I am strongly of the belief that we must make OBSI work and that those concerned must be more understanding of the consequences of rigid positions. The recent reports of refusal of a number of investment dealers to comply with the decisions of OBSI are troublesome. I think it in the best interests of the industry to apply such pressure as is available to discourage these responses.
One should not consider it a viable alternative that there not be a dispute resolution process in place for which the investment industry pays the cost. The questions are only as to the degree of independence the investment industry retains in the management of the process and the degree to which securities regulators are forced to take responsibility for a legislated system and mandated awards. The further engagement of regulators and mandated decisions will only add to the cost and length of the process. I believe there are more simple and less costly solutions.
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Industry Input
Closing back on the broad topic of regulatory burden, we regulators hear criticism of a lack of prioritization and of incessant changes. We have in our jurisdiction in Alberta asked industry for something more specific to deal with, such as: what are the regulatory demands that lack utility, and how can we reduce the volume without sacrificing the investor protection impact? I think it a fair question to ask: what specifically are the practical burdens of our regulatory demands and what can we get rid of? It is not helpful to receive an answer that suggests there is no point industry making the effort unless the regulators first agree that recommendations will be accepted. To bore you yet again with my lawyer analogies, would anyone think it a useful position to inform a court that you have a persuasive case but cannot take the time to deliver it unless first assured that it will be successful.
Finally, on the subject of feedback, regulators need the best information possible from those who have to conform to our regulation. In that regard, I would ask that it be as specific as possible. We all know that there are at least two sides to every position and that what benefits one side is likely to be seen as a cost or detriment to others. In picking the balance point, we must be informed of all the facts and all the consequences. I know that takes time and is a distraction from getting on with business, but I also know that it will save costs, time and distraction in the long term.
To summarize, acknowledging that (i) there are grave concerns about the harmful impact of the expanding regulatory burden, and (ii) there are no
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silver bullets, are there a number of incremental changes that can be pursued which, together, might produce positive results?
(1) Can we reduce the reliance on rule making and specific compliance and focus more on principles and their rigorous enforcement? In doing this are both the regulators and the regulated prepared to better accept each other’s exercise of judgment?
(2) Do we have the confidence to develop “in-Canada” policies and be less fearful of being different from the Americans?
(3) Are we prepared to pass by last year’s problems and those exposed in other jurisdictions and focus on what our circumstances are here in Canada?
(4) Do we need to devote time, effort and costs to new standards of conduct when a rigorous adherence to existing standards might get the job done?
(5) Can we dedicate less time to paper compliance, with the belief that some hard work reducing the volume now might save much more down the road?
(6) Might an acceptance and application of the paramouncy of disclosure ward off the regulators from more substantive intrusion into your business?
(7) Can we all work more closely to fully understand and appreciate the influence of technological changes – or as they are referred to, advancements?
(8) Might a greater degree of self policing lessen the inclination of regulators to control with rules?
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(9) Can organizations and compliance officers comfort regulators that we have not lost a culture founded on an unwavering standard of ethical behaviour?
(10) Can we ensure that simple and available solutions are used and improved – like OBSI – instead of forcing the creation of new and more complicated ones?
The current and significant stress on many in the investment industry is attributable to a great degree to the events of 2008 and the state of business and investments cycles. Changes in those cycles will at some point relax much of the stress, but the timing of such changes is impossible to predict. We regulators run the risk of making unnecessary regulatory changes when those cycle changes may overtake us. We also run the risk that without trying new and better approaches soon, avoidable damage may be done. We are back to the balance issue.
I would invite the industry to tell us the severity of the stress, the influence of the regulatory burden and the efforts you, particularly in the compliance business, would like to see us make. And please take the time to give us the specifics.
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Mon Jun 10, 2013 9:50 pm

Screen Shot 2013-06-10 at 10.47.44 PM.png

Securities Commissions are careful to call a salesperson a "salesperson" when charging them, yet they turn a blind eye to salespersons calling themselves "advisor" when they take customers for a misleading ride......... who pays the regulators again? (This securities commission document is a pretty good illustration of how this works) ... sp=sharing ... _muzik.pdf
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Mar 19, 2013 10:02 am

Screen Shot 2013-03-19 at 10.57.00 AM.png

Put investors’ interests first: survey

OSC’s Investor Advisory Panel releases survey findings on adviser/investor relationship By James Langton | March 18, 2013 16:40

An overwhelming majority of investors say that financial advisors should be required to put their interests first, according to a new study released Monday by the Ontario Securities Commission's independent Investor Advisory Panel (IAP).

The study, which was conducted on behalf of both the IAP and the Investor Education Fund (IEF), counters some of the rosier claims of the industry-financed research into the depth of investor trust in the financial industry.

For example, it reports that, while investors generally trust the advice of their financial advisors, only 20% of investors "strongly agree" that they generally trust their advice. And, almost two thirds say they believe that how an advisor is paid impacts the recommendations that they receive (64% overall, comprised of 25% who strongly agree, and 39% who simply agree). Yet, more than 40% admit that they don't know how their advisor is being paid.

The IAP stresses that advisors need to give their clients greater assurance that their best interest is being served. Indeed, it reports that 93% support the imposition of a statutory best interest duty on advisors (with 59% strongly agreeing that it is needed).

It says that investors want other aspects of advisor regulation strengthened too, including clearer professional standards on use of titles, rigorous educational requirements and ethics training, and stricter enforcement.

"This investor research will inform and support our recommendations to the Ontario Securities Commission regarding future statements of priorities," said IAP chair, Paul Bates. "The research will also inform our positions regarding investor protection initiatives, including the introduction of a statutory best interest duty to replace the current inadequate suitability regime and reforms to mutual funds' compensation structures in Canada."

The survey confirms that there is a clear power imbalance between investors and advisors, with only 11% describing themselves as "very confident" in their financial literacy. It also found that confidence is lower among female investors, and younger investors. And, as a result, a majority of investors (58%) rely on their financial advisor as their main source of investment information.

Notwithstanding these vulnerabilities, investors also believe that their financial advisors have a positive impact, the study notes, with over half saying that they believe their investment returns are higher due to their advisor, and 70% reporting that they have remained invested in volatile markets because of their advisor.

In terms of choosing an advisor, the survey says that institutional brands and personal recommendations are the leading factors influencing investors' decisions, but that performance has the greatest influence on whether an investor stays with a particular advisor.
Additionally, the survey finds that investors want more plain language product information and improved content and presentation in investment statements to help boost investor understanding. And, it says that investors also acknowledge the need to educate themselves in order to bolster their confidence.

The research was conducted by Ascentum Inc. and is based on an online survey of 2,030 Ontarians from the Ekos Probit research panel, and 52 participants took part in face-to-face dialogue sessions.

(advocate comment on the intentional misrepresentation of the "advisor" and other titles: )

Screen Shot 2013-03-16 at 7.22.36 PM.png ... -afternoon
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sun Mar 17, 2013 2:58 pm

Screen Shot 2013-03-17 at 3.58.54 PM.png ... leplay.pdf

senior compliance officer writes about how investment sellers play games with their titles to help fool clients

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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Fri Mar 08, 2013 8:45 pm

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too funny!

A long list of Canadian sellers/dispensers of investment products/"advice"........all lining up to poke at industry proposals to protect investors better........a mandatory best interest standard...........which used to exist as little as ten years ago, hmmmm. At least all the training manuals in the industry said it existed.

Read up on how your very own financial "advisor" is lobbying in the background to not have to place your interests ahead of their own.........

then view this video and learn a bit more of the bait and switch game you are a victim of........

Screen Shot 2013-03-04 at 10.15.37 AM.png
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Thu Feb 28, 2013 3:34 pm

see this post in the "fiduciary" topic of this forum


for a very well done expose related to the topic of advisors/salespersons

it is well worth it
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sat Feb 09, 2013 9:59 am


As covered in previous posts, the post-GFC world is a tumultuous one, with many long cherished “laws” of investment being turned on their head, and many investors feeling helpless in the face of small, zero or negative returns. Some are abandoning financial advisors in favour of a ”do-it-yourself” approach to their finances and investment. It’s already the case that it is only a minority of Australians who regularly deal with a financial advisor, so i’m wondering if this is the best outcome overall. It’s not a simple question though, so i thought it best to tackle the issue by working through some of the areas in which confusion as to the role of a financial planner can arise. This post looks at some of the limitations as to what a financial advisor can or cannot do for you.

Remember, this is simply my opinion. I’m biased because i am a financial advisor, and i am a part owner of a financial planning business. Feel free to ignore any aspect of what i have to say but regardless, there is a lot of misinformation, bias and distortion out there in that big, wide world and this is my attempt to put some logic into the thinking about financial advisors – what they can and cannot do for you.

You will find quite comprehensive listings of the shortcomings of financial advisors and the financial planning world by trawling through just about any of the “do-it-yourself” websites or organisations. If you don’t have time, i’ve included a couple of links at the base of this post to some articles from the “Motley Fool”, one of the world’s largest such sites. It’s American based (an Australian arm is building its base at the moment) but a lot of the ideas hold true here in Australia. If these articles don’t convince you to abandon your financial advisor then i’d be rather surprised.

Firstly, we need to get a couple of key points very, very clear.

All Financial advice is very limited
And if it isn’t then it is of limited use to you. Let me explain…

There are theoretically two types of advice on offer today:

General Advice
Personal Advice
General Advice is the type that is provided by websites, newsletters, newspapers, magazines, tv, radio and broad mainstream media. It is the type of advice that you expect someone to give when they have no idea of your personal position.

For example, a highly respected newsletter may suggest that you should be paying down mortgage debt as the most appropriate way of investing your spare income to improve your finances. Without pointing fingers, we could suggest a government website that makes exactly such a suggestion – and the website even goes as far as saying that this is “the best option”. While the comment may be generally true in a purely generic sense in a credit constrained, post-GFC world, there are circumstances when it would definitely NOT be the “best option” for an individual. For example

when a person’s job is at risk and they have little reserve cash,
when they do not have sufficient insurance,
when paying down your mortgage is not accompanied by easy access through a draw-down facility in the event of financial stress,
when close to retirement and money could potentially be contributed to super as a concessionally taxed contribution, and withdrawn later to retire debt. This could substantially reduce the total dollars required to reduce the debt, and increase options for maximising the value of a given dollar.
when the person has credit card or other high-interest debt that should be cleared first.
The point being that “general advice” is a dangerous weapon, and like all dangerous weapons, it’s potential for harm should never be understimated. What may be true in a general sense may be completely untrue and damaging in certain circumstances. That is why “general advice” is supposed to be accompanied by a general advice warning – which should point out that this general advice could turn out to be completely and utterly useless to you, and you should take no action on that general advice without seeking personal advice to ensure that the general info is applicable to your circumstances.

That doesn’t stop ”general advice” being helpful in a broader sense but it should serve as a warning about taking too much that you read, see or hear, to heart.

General advice is dead easy to give…
It truly is. The average financial planner in Australia today could write an article for just about any of the major newsletters and it would be up-to-standard as general financial advice. Financial planners are required to keep up-to-date in a wide range of areas that would be standard grist-to-the-mill for financial newsletters. For example, in the recent past, i have attended analyst or investment updates from Westpac’s BT, Advance, Goldman Sachs, Platinum Funds Management, Colonial First State, NAB and others – as well as partaking in webinars, webcasts, telephone hook-up’s and one-on-one meetings with property, venture capital and alternative asset managers or representatives. And i am quite selective of where i go and how my time is spent. And yet i am no Robinson Crusoe in the financial planning world. You will find that financial planners are a reasonably up-to-date bunch.

That is not a brag paragraph but a snapshot of some of the personal time, research and effort that a planner uses just to stay in touch, so they can more prudently build, manage and discuss long term plans in an extremely volatile world.

My point is that a financial advisor does not have the luxury of simply taking a point, waxing lyrical on it, and moving on to the next point – because that is what “general advice” is all about. On a scale of “easy” to “hard”, it’s pretty much at the bottom of the advice pile. That’s because it does not have to cater for anything more than the trend of the day.

This is most easily borne out by looking at any self-help website or newsletter (such as this one), and looking at what is discussed on a particular day. If that site suggests the property market is “high/low/boring” then its’ no big deal to put out a completely opposite statement a little while later. Not so easy for the person who when ahead and bought/sold/jazzed up their investment property following the original article… that investor has to deal day-to-day with the consequences of their actions. They must continue to meet ongoing interest on any loans, negotiate with tenants/agents on maintenance, contract renewals, rent arrears, insurance/rates/ repairs and generally ensure that their original decision continues to make sense. It’s the same with personal investment websites, magazines, and other forms of general advice with regards to mortgages, property, shares, asset trading or just about any other form of money activity. For example, there was once a column called “Blue Spec” (i may not have spelt that correctly…) in the Personal Investment magazine, which offered tips and tricks, and portfolio suggestions for running a share account. It ran for years, with pithy comment and market insight that can only be gained from someone with intimate participant contacts and leading edge access to information. And yet the column eventually closed down, partly owing to the inability of the ongoing portfolio to beat the overall market indices over the long term. That is not unusual, as it is extremely difficult to beat market indices – but it does show that the general advice given by even the best of the best that is available, does not necessarly mean that you will obtain the best outcomes.

Financial Planners do not have that luxury. They have to give concrete recommendations. They have to put their name on the line, and give advice on when to sell or buy, and what to sell or buy. When to look at this strategy and when to look at that strategy. This means the planner is distilling a raft of inputs in a football field with goal posts mounted on wheels. They cannot say “move to cash because the world is ending” without having a backup game-plan because they know the client still has goals and objectives they are hoping to achieve, that will be less likely to occur if (as an example) all money stays in cash.

With these comments, i am not asking for forgiveness on the errors and misjudgements and misdirections of every planner whose advice has ever led to worse outcomes. i am simply trying to highlight the difference between advice that is provided in a general sense (eg. “the world is risky – cash is looking attractive”), and that which is personal (eg “you are unlikely to achieve your long term goals if you hold cash investments at greater than 40% of your assets, and without taxation reduction, you will be working 5 years longer to achieve the same outcome”).

Financial Planning – Personal Advice
“Personal advice” also has two component parts, which i will refer to as “full advice” and “limited advice”.

There is that which is most beloved by regulators, professional bodies and “dealer groups” (the name given to the entities holding the Australian Securities and Investments Commission, “ASIC” licence that allows them to licence authorised representatives who then give you advice). It is “full advice”. It is usually delivered in a thick, rambling Statement of Advice document. i’ve called it “full advice” because the idea is that this document encapsulates all of the following:

A snapshot of your complete current financial position
Personal contacts details, age, occupation, health
Assets and liabilities
Income and expenditure
Likely or anticipated changes to any of these
A statement of your aims and objectives that have a financial impact
A statement of your assessed attitude to risk and the risk/return trade-off
A list of recommendations based on these factors in the light of :
Current legislation
Current and anticipated Centrelink positions
Assumed asset class rates of return and relative risk
Assumed inflation and interest rates
Assumed portfolio construction outcomes in different market cycles and environments
A review of available investment options, including financial products
As assessment of the taxation impact (although financial advisors are not Accountants)
Recommendations will include statements and/or calculations on
Cashflow and budgetting
Retirement income planning
Wills, powers of attorney and estate planning
A “because…” statement that sets out why these particular recommendations are appropriate to your financial situation, objectives and risk tolerance, based on an anlysis of all the factors mentioned above
A list of alternatives considered
A disclaimer and warnings of limitations for the advice or the advisor
A statement of fees and costs for the recommendations being made
A statement of where the advisor and dealer group receive fees, compensation or money – and how much
Copies of appropriate research on financial products recommended
As you can imagine, this is a time-consuming effort for even the most straight-forward of financial situations. This isn’t an exhaustive list but some folk suggest my musings are a tad lengthy so i’m working on an abridged version.

One of the limitations expressed in such a missive is a time deadline, after which the recommendations no longer hold. Similarly, if the client’s personal objectives or financial position change then the recommendations are no longer approrpriate.

The idea is that a person is then in a position to consider this recommendation, and to decide whether or not to implement the suggestions it contains.

When the time comes to review the recommendations, all of this is repeated.

This is “full advice”, and the idea is that all advice is this kind of advice, unless it is specifically limited in some way by the advisor, after confirming the agreement of the client to those limitations. You may have spotted the limitation of the full advice approach – it’s only appropriate at the time it is recommended. Regardless of the work done by the advisor to try to deal with changes of one type or another, small changes in underlying assumptions can rapidly erode the value of the full advice statement. To check whether the advice remains correct, the advisor has to start the entire process over again.

Because of that, full financial advice is expensive. If it is not then it is most likely not full advice. It’s probably general advice, wrapped up as personal advice.

Personal advice is expensive. Full stop.
As a by-the-by, recent polls suggest that Australian’s still don’t like paying for advice but where they do, the expectation for the cost of a position review is $590. When polled, financial planners average expectation of the cost of providing that review was $2,500. There is a bit of a mis-match in the perceived cost of providing personal advice and the actual cost.

Such misconeptions are not helped by the “free advice” statements included in a lot of super fund and investor material these days. If there is a financial advisor out there prepared to offer “free advice”, send them to me. I’ve heaps of work that i’d love some competent, qualified and experienced person to assist me with – especially if they’re doing it on a volunteer basis.

Now that would help me bring down the cost of advice…

Financial Planning “Limited Personal Advice”
Now we move on to the “limited advice”, which is that required by the vast majority of Australians on the vast majority of occasions that financial advice is required. Examples would be where people want the advisor to ignore the bulk of their position, and focus on one or two areas only – such as insurance or superannuation or investments outside of super or cashflow and budgeting.

Clearly, there would be circumstances where advice could be provided on these areas without the need to cover the full advice spectrum. However, ASIC and dealer groups are wary of such limitations, as they could allow an unscrupulous advisor to simply “limit away” key areas. In such circumstances, the advisor is able to focus on a “quick sale” of a financial product or service, and avoid a great deal of the work normally required to ensure the advice is adequate, appropriate and tailored to the needs of the client. ASIC rules and simple common courtesy require the advisor providing “limited advice” to highlight the inadequacies of any such advice, and to provid warnings and disclaimers that can theoretically help the customer decide whether limited advice is really what they want and whether it is in their best interest.

This is something that ASIC is grappling with right now – how can the cost of advice be kept within the reach of the average Australian (more specifically, the average superannuation fund member), without reducing its effectiveness by allowing advisors to limit their obligations to provide “the best” advice?

There are a lot of vested interests pushing the barrow of their particular lobby. Super funds would like to be able to advise fund members of answers to simple questions without having to charge an arm and a leg to do so. A person wanting to take out more insurance doesn’t necessarily want to review their Centrelink entitlements. It’s a tough job to get the legislative rules strict enough to protect the general public without having those rules lift the cost of advice out of reach of that same general public.

For example, Industry Super Funds are lobbying right now for changes to “intra-fund advice” under the new MySuper rules that will allow the fund advisors to provide severely limited advice – for example on rollover from a super accumulation to a retirement pension account. Usually, a financial planner must look at all potential alternatives – which we know is expensive – and the Industry Super folk are trying to keep the cost of that advice as low as possible, so that it can be provided under the standard fees of the product. In effect, they are asking the government to approve a substantial increase in bias (pretty much no comparison with other funds will be required) in the name of providing a lower cost service.

From the perspective of the average person on the street, limited advice makes a lot of sense. Most people have a fairly good idea of what they want and need – they just need help to sort through the raft of options that are really only clear to someone who works in the industry.

Ongoing versus transactional advice
As a financial planner who tends to deal with people over the longer term, it appears to me that regulators and legislators in Australia see all financial planning advice as a sale or a transaction. That is, the only point of seeing a financial planner is to take out or increase insurance, to start or change your superannuation or to account for some life change, such as marriage, a job change or a single major financial decision – like retirement or buying an investment property. These are all valid reasons to see a financial planner but over the years, most of the people that i deal with on a regular basis are simply paying to have me available – as someone who understands their long term aims, and is trying to help them navigate the range of financial decisions encountered over many years – and not just one single decision. This approach to planning does not appear to receive much airplay when legislation and policies are being put together.

Owing to this approach, it is easy to see why so many “do-it-yourself” services can look attractive when compared with a full financial planning service. It’s just a matter of divergent expectations on service provisions.

Most commentary i read about financial planning is based on the assumption that every interraction is a sale and a sale that involves investment advice. That’s simply not a true reflection of a lot of what financial planners can do. For example, a good deal of my time is spent discussing outcomes and alternatives for courses of action. They don’t even relate to investment. Some use the term “strategy” but regardless, it’s not always about the best/worst investment option.

Another common assumption is that the bulk of advice is provided for superannuation advice. In our business, we can pinpoint 22% of our business income as relating to the provision of advice on superannuation. That’s not what you’d expect when you read government or consumer advocate reports and papers.

Very little commentary sees the value in having a human being to talk to. Simply talking. Not everyone has the time, interest or ability to read up and study every aspect of their finances. Many people want to talk through the context of their financial world, and use that as a chance to gain a greater understanding. They could go to seminars or sign up for courses but most people know that this is only part of what you need when you are confronted with daily decision making on money matters. And that is where a human being that can help clarify specific point can be helpful.

Financial Planning – Most advice is actually a sale
Did you know that? Yes, my friend – there aren’t a lot of financial advisors out there who will simply charge you a fee to sit and chat about money. That’s because most advisors work for dealer groups who also sell financial products, and the advisors get to keep or lose their financial planning role depending upon the level of financial product sales they achieve. This does not mean that the advice provided is wrong or not appropriate. I know many financial planners employed by banks or major institutions that i would be happy for them to provide advice to my own family or even myself. It simply means that this is just one more area of potential bias that you need to be aware of.

Of course, there is another reason that most financial advice is a sale. It’s the fact that most Australians will turn to family, friends or associates for advice before they turn to a financial planner.

That is, most people in Australia are not used to the concept of paying money to sit and chat about their circumstances to someone who has a handle on the world of money. Some of the people that i see are quite self-directed, and so they simply pay me to let them bounce their ideas around. Not everyone is prepared to pay $330 an hour or enter into a long term fee arrangement for that privilege though. Most people want that advice for “free”, and so they will visit their local bank or see someone from their super fund in the hope of not paying that hourly rate. i’ve even had people tell me that the recommendations prepared by a financial planner from their super fund were “free”. mmmmm….. you mean that qualified financial planner works as a volunteer? As per my earlier comment, maybe they’d volunteer to work in my business for free?!

And so a great deal of advice is driven by specific objectives, such as questions on super or insurance, which ends up with most advice being in the form of the sale of a financial product.

How you pay for advice
This is the focus of the bulk of discussion on financial planning in Australia today. Everyone has an opinion. Many commentators suggest that Australians would be better off if all financial advisors charged for their services a particular way – the most commonly proposed method is via hourly rates. Another commonly proposed arrangement is the separation of advice from the selling of products. That’s a tough call though, as it would make it particularly difficult to provide cost effective advice to super fund members. It may not make sense but what it would mean is that someone working for the Industry Super Fund AustralianSuper, for example, would have to assess the full gambit of superannuation offerings before answering even the simplest of questions on their fund – and that would be a crazy outcome.

ASIC has recently enforced the long-standing rules about the use of the terms ”independent” and “unbiased” in the world of money, forcing many groups to stop using the term. The reason is that any dealer group that receives any form of commission cannot call themselves independent under the terms of current legislation. For example, Wealth & Security Planners receives income in the form of ongoing commissions on most of the insurance, investment and superannuation policies that it is noted as “advisor” on. Even if the business can provide an hourly rate specifically not tied to any product sale, the business cannot use the independent terminology. And that’s a good thing, too – as there are plenty of super-keen dealer groups that like to push any legislation into grey areas. Unfortunately, the recent changes to the financial services industry brought about by the government, will be highly unlikely to reduce bias in the industry. If anything, there has been a sharp consolidation within the industry, with many dealer groups actually “white badging” financial products so that they can replace income lost through other parts of the legislation. The more things look to be in favour of the investing customer, the more i see nothing but a further entrenchment of bias.

A quick note on fees…
The articles shown at the base of this post are fairly negative on advisors but they do highlight some of the areas that can be difficult when trying to make sure you only pay for the advice you need.

A lot of commentary seems to be based on the idea that paying for advice can only be a bad thing. This seems rather strange to me – it’s like someone suggesting that Tiger Woods shouldn’t pay for a coach because he’s already one of the best in his field. Similarly, not everyone has the time or even the interest to put their abilities into coming to grips with every aspect of their financial world.

One of the facets of money that is usually absent from any such critique’s is the cost of the alternative. In other words, if a person did not seek advice, what would be the cost of solely following their own thoughts and investigations? There is no guarantee that obtaining advice will provide a better outcome, as everyone has their own level of skills, expertise, knowledge and financial literacy but it seems a rather strange perspective to suggest that not seeking financial advice or input from a professional will always provide a better outcome.

As a financial planner who often spends a good deal of time trying to navigate this option against that option, amongst a swirling mist of ever-changing variables, it seems a fairly long draw of the bow to suggest that paying for financial planning advice is always a bad thing.

One of the interesting things i have noticed about fee comparisons is that the yearly and ongoing cost of “trailing commissions” is usually explicitly calculated and highlighted, whereas the cumulative cost of hourly billing rates on transactional enquiries is barely ever given even the slightest consideration. i know this because i have tried to estimate the ongoing cost of hourly rates on a “present value” basis and compare them with ongoing trailing commissions, and the results can be very surprising. But there’s no point ruining a good story with facts now, is there?

The key with fees is to talk to your planner about your preferences – but also being open to the possibility that your planner is currently undercharging you for the services they provide. Here’s a quick example… There are sites on the web, where you can transfer the “noted advisor” status to the site’s dealer group. In return, they will rebate the commissions you are otherwise paying. That’s not always the great answer it seems (there’s a lot in this issue, so i’m trying to keep my comments brief), as the site will usually only rebate amounts over a minimum figure (such as $300 or $400 or the like), and often less than 100%. In other words, there is a cost to simply having your policy or account “on the books”, and this is often forgotten in any fee discussion.

How do i know advice is ”good” advice?
Quite simply, you don’t. That’s a bit like asking a person to grade the technical proficiency of a solar panel installation. Unless you are qualified in the task, it’s a pretty tough job trying to ascertain whether what you have is exactly what you need.

However, there is the good ol’ ”duck test”…

If it waddles like a duck, quacks like a duck, and flies like a duck – it’s probably a duck.

If you look closely, you’ll probably come to the conclusion that it’s a duck. Source : ... -duck.html (AP Photo/Matt Cilley)
This is a big field of enquiry, with many twists and turns, so feel free to submit questions or thoughts and we’ll cover them in more detail over coming months.

Links to articles highlighting the potential negatives of financial planning advice.

“How to assess your financial advisor’s performance“ – a damning assessment of the investment credentials of financial advisors.

“So many hidden numbers: How advisors give their clients the vampire treatment” – after reading this, no-one would ever visit a financial advisor again.

Tags: advice, bias, financial planners are cheating you, Financial Planning, financial planning bias, personal financial planning advice

This entry was posted on May 18, 2012 at 11:45 am and is filed under Fees and Bias. You can follow any responses to this entry through the RSS 2.0 feed.

One Response to Financial advisors are cheating you

best financial advisors on June 5, 2012 at 2:38 pm
I don’t think that they cheat at all as I am following financial advisor for my investment and I hardly got any loss in stocks and bonds. I will definitely recommend there might be some cases for fraud but at least we have some honest people in financial advisor industry. ... ating-you/
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Wed Jan 30, 2013 1:58 am

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January 15, 2013 To:
Rossana Di Lieto
Vice President, Registration, Complaints & Inquiries Investment Industry Regulatory Organization of Canada Suite 2000, 121 King Street West
Toronto, ON M5H 3T9
Fax: 416-364-9177

Joe Yassi
Vice President, Business Conduct Compliance Investment Industry Regulatory Organization of Canada Suite 2000, 121 King Street West
Toronto, ON M5H 3T9
Fax: 416-364-8715

IIROC Notice 13-0005 – Rules Notice – Request for Comments – Dealer Member Rules - Use of Business Titles and Financial Designations

To whom it may concern:

I now have slightly over 30 years of experience in or around the Canadian investment industry. I feel privileged to have this dialogue about matters which are not typically allowed to be discussed in this industry. I will try and cut straight to the point that I feel most important to the welfare of Canadian investors.
The investment industry is perversely incentivized to increase profits even at the expense of doing intentional harm to investors interests. The protective duty owed to the public interest by industry, and by regulatory and self regulatory agents, appears to have been lost, forgotten, or silenced. I have found this to be the case time after time. Despite all attempts to portray the industry as a professional body acting in positions of trust, this submission will attempt to show how far short the industry has come in living up to the promises.

1. Customers are being tricked into a relationship where the product or service they get is not what was promised to them, nor what they are led to expect. It is the foundation for intentional deceit of the public.
This commentary hopes to open a dialogue on the abusive nature of our system. Misrepresentation of titles is one of the foundations for the abuse.
Larry Elford Lethbridge, Alberta

The following article, published December, 2012 (, by Larry Elford, former industry participant, outlines some of the issues related to this industry bait and switch:


One definition of fraud is “the deliberate deception of consumers”. In this column I would like to open a conversation into a dark world of deception within some of the most “trusted” financial institutions in North America. Sadly, during the twenty years I worked inside the investment industry, this conversation was never allowed.

In the United States there are more than 11,000 registered investment advisors according to the SEC. These are generally people who are licensed, trained and paid to act in the capacity of a professional advisor. In this capacity they are required to act in the best interests of the customer and they give this to you in writing. It falls under the Investment Advisor Act of 1940.

There are also some 600,000 broker-dealers registered in the United States and they do not have to act in the best interests of clients. They are more likely the brokers and salespersons trying to earn a commission from selling a product such as a stock, bond, or mutual fund etc..
The problem for consumers begins when those 600,000 broker-sales-types identify themselves to customers by the title “advisor” even though they don’t have the proper license or registration under the law. In my experience, this sleight of hand is done to allow salespersons to raise the level of trust in customers, while lowering their level of caution or suspicion. The comments about title misrepresentation by Quebec Superior Court Judge in Markarian V CIBC is along those lines as well. See “Misleading Titles” beginning at paragraph 262
here [url]

If you take this information to independent legal counsel you may also get comment on “phony titles and negligent misrepresentation”.

Here in Canada there are approximately 150 firms who are members at

These professional investment managers are legally registered as “adviser’s” and they provide a written duty to place the interests of the customer first.

Then there are the 150,000 registrants, who were legally licensed as “salespersons”, until September of 2009, when the word “salesperson” was deleted from the Securities acts of 13 provinces and territories, and replaced with the words “dealing representative”. Nearly 100% of these sale-types usually refer to themselves as “advisor’s” in an effort to increase the “trust” they hope to earn with customers.
Each one of those people may also be trying to represent that they are “advisors” and using the word advisor to imply that they will give advice that is in the best interest of the customer. This often forms a part of the deliberate deception that was spoken of at the outset of this article.

An interesting side benefit of dealing with a registered adviser is that usually the investment management fees start out in the neighborhood of one to 1 1/4% and there are no sales commission people who may be motivated to increase those fees in ways that can harm the customer.

So with a licensed and registered advisor, a customer gets a true professional with the fiduciary duty and an almost wholesale level of investment pricing if you are fortunate enough to deal with them.

With a salesperson or broker, representing him or herself as an “advisor”, there is less qualification, no advisor license, no duty to place the interests of the client first, and fees will usually begin at about 2% and go as high as more than 5% on some products sold. In defense of the sales side of the industry, some do have professional membership which requires them to pledge allegiance to ethics and fair treatment of clients, however I have yet to see enforcement of those pledges within the industry.

In two most recent cases of financial misconduct I have found investments with multiple layers of fees, piled one on top of another, on top of another. Fees in excess of 5% annually are the kind of things that turns a broker-salesperson, into a “vice president” or a “million dollar producer”. Unfortunately none of that serves the customer.

I spoke about one specific example at the launch of the THIEVES OF BAY STREET book and it’s on my YouTube channel here along with a dozen video presentations on this and related topics.

So customers who end up dealing with a salesperson-broker in Canada or the United States, most often get a person who is (a) pretending that they are an investment advisor , who (b) is not a licensed and registered professional in the category claimed on their business cards, and (c) does not owe customers a duty of care to place customers interests ahead of the seller.

I believe that salesman-brokers who call who call themselves “advisers” are one of the greatest systemic bait and switch operations in the world. I encourage victims of this misconduct to seek legal opinion from far outside of the financial industry in order to gain objective access to the law. If you ask a securities lawyer or regulator, you are very likely to get an answer as independent as the advice you get from a non-licensed “advisor”. (see comments regarding this in the SEC petition in following paragraph)

During my research for this story I ran across this well informed agency in the United States, and a written petition they made to the SEC. It is among the most candid and enlightening articles I have seen, to honestly discuss a matter which is cheating and shortchanging North Americans of billions of dollars, and putting those billions into the pockets of industry members who are acting with misconduct. It is found here at the SEC:

Two simple solutions.
First Proposed Solution:
1. If persons selling investments refer to themselves as “salespersons” then there is no fiduciary responsibility.
2. If persons selling investments refer to themselves as “advisor” or any similar term, they must accept a fiduciary responsibility for those they claim to advise.

This simplicity meets the standard of fair, honest and good faith dealing which is promised by the industry. It also meets the “true, plain and clear” standards often referred to.

Terms like 'registered representative' are industry insider “jargon” and should not be used to address the public.

Jargon is currently allowed to confuse the public, and assist those who would mislead and misdirect them for commission or fee purposes. Any industry claiming to deal in trust and honesty, must demonstrate the maturity to move beyond such sleights of hand.

Simplicity like this is either in place or in discussion in other developed countries. Canada needs to professionally “grow up”, if they are to reverse the destruction of the reputation of the financial industry.

Failure to act in a professional manner, is putting billions into the hands of current market participants, but like the CEO of Lehman in the US, it is not mature to destroy the reputation (or company, or industry) simply to earn a personal salary or bonus. Many of today’s Canadian market participants appear willing to take the short term view, rather than the longer term approach, and this must be prevented even if it means a new regulatory system must be put into place.

Codes, rules, promises, laws, etc., often violated by “trusted” investment professionals. Some examples of the resulting “tricks of the trade” which are then used to harm Canadian’s financial well being.

From the high-moral-ground of self regulation, along with some high-six-figure salaries paid to provincial government regulators by the industry, anything, literally anything appears possible. Up to and including gaining exemptive relief to our very laws, often at tremendous harm (and semi-secrecy) to the investing public. ($35 billion was the cost (to Canada) of just the recent sub prime ABCP collapse)

When combined with the ability to self regulate, an industry of highly profit-driven people who misrepresent themselves as licensed and professional “advisors”, the customer is bound to be hurt. In this industry the customer is nearly each and every Canadian with an objective of saving, investing, or living off their investments in retirement.

We are thus allowing the abuse of elderly Canadians, for the benefit of the investment industry.

The cost to the country is not being tracked officially, but well into hundreds of billions over time. The profits to the industry are obvious.
Some of those profits to the industry, which come at harm to the customer include the following types of public harms:

1. Double dipping, a form of extra billing (adding “advisory” fees on top of commissions already paid).
2. Fees layered on top of other fees. See presentation at to view nine or ten ways todays “advisor” can cut their customer’s retirement by half or more in an attempt to increase their own revenues.
3. Selling the highest-compensating-choice of an investment product about 80% of the time (deferred sales charge funds for one example)
4. Selling the highest profit margin product (over 90% of mutual funds sold in 2007 were WRAP funds) (source Investment Funds Institute of Canada)
5. Wrap funds include “funds made up of other funds” (and fees on top of other fees) as well as proprietary funds (house-brand funds) which increase profit margins to the seller by up to 26 times. (according to the OSC Fair Dealing Model Appendix F, page 10, titled “Compensation Bias’s)
6. Exemptions to the law (including exemptions to firms like Assante and Berkshire so that the house branded funds mentioned above could be easily foisted upon clients of these firms)
7. Exemptions to the law to allow banks to “unload” poor selling investment underwritings into the mutual fund portfolios of their trusting and unsuspecting customers.
8. Exempt market products. (approximately $2 billion of which are currently failing in Alberta alone)
Too many other examples to list herein, show how “the harm done to customers is the increased profit for the salesperson on a commission, or the industry”.

Candid media quotes about violations of the public by so-called-professionals.

The quotes following, are from respected experts and refer to industry misrepresentation, deceit, false pretense or outright fraud:
1. “ advisors, wealth managers, senior financial planners, financial analysts, and investment managers are just a short list of titles that salespeople like to adopt, in an effort to steer clear of the “salesperson” stigma........”

From “Understanding Misleading Financial Advisor Titles – Your Right to Know” Bryon C. Binkholder
2. "Anything else is fraud, because the seller is delivering a service different from what the consumer thinks he or she is buying. " Edward Waitzer article, Financial Post · Tuesday, Feb. 15, 2011) (Mr. Waitzer is a Bay Street Lawyer and former Securities Commission chair, and this quote ( by another person) appeared in his article.

3. “The greatest risk the average investor runs is the risk of being misled into thinking that the broker is acting in the best interest of the client, as opposed to acting in the firm’s interest,” Professor Laby said. New York Times (Arthur Laby, a professor at Rutgers School of Law-Camden, and a former assistant general counsel at the S.E.C.)
4. This misrepresentation allows persons with a “phony title” to financially violate trusting and vulnerable Canadian investors (and similar across the USA) is one comment from Quebec Superior Court Justice The Honorable Jean-Pierre Senécal, J.S.C., Quebec Superior Court , District of Montreal
The Honorable Jean-Pierre Senécal, J.S.C.

¶ 263 The defendant attributed to Migirdic fake titles, i.e. "vice-president" and "vice-president and director", in addition to letting him use the title "specialist in retirement investments". Those titles were false representations that misled the plaintiffs, hid reality from them, disinformed them, comforted them in their confidence in Migirdic, reduced their distrust, and contributed to Migirdic's fraud. The defendant committed a fault in terms of its obligation to inform and advise, in addition to misleading the plaintiffs.

Further and link to full court documents here: [url] f=1&t=10&p=3454&hilit=markarian#p3454

The self regulatory nature of the industry then gets to “handle” each complaint “within” , essentially employing “investigators, judge and jury”, from persons employed (or paid) by the industry itself. This then forms a secondary form of abuse, which is the withholding of justice, and access to the courts for victims. They are dealt with in a manner resembling a Kangaroo court where bias is towards protection of the industry. Many victims tell that it is like being traumatized a second time by the system itself. An American advocacy organization submitted a very well written petition to the SEC, describing this problem in better words than my own. It is found here

Conclusion and Summary page

In conclusion:

Your investment “advisor” can give you advice which harms you.
Your investment "advisor" does not have to have an advisor license.
Your “advisor’s” conflicts and incentives mean that harming your interests delivers improved profit to the industry.
Fraud, misrepresentation, false pretenses may be used to harm you.
The law may not be applied to help you if you are harmed in these or other improper ways.
The law may even be "exempted" so your investment firm can more easily profit, despite harm to you.
Self regulation allows persons paid by the investment industry to act as if they are paid to protect the public, which does not often appear to be the true.
Canadians lose billions of dollars of rightful investment earnings, while the strongest financial institutions in the world gain billions.
To repeat for clarity, I am not concerned with charging a “fair, honest and good faith” price for investment services. That is not the question under discussion. The question under discussion is whether Canadians should be harmed by billions of dollars, using deceit, false pretenses, misrepresentation and so on.

Should the investment industry be allowed to get away with such behavior, and does the regulatory system in Canada that appears to be willfully blind to these and other abuses, need to be replaced or enhanced, with one solely dedicated to the protection of investors?
The best thinking in Canada has given us a system where financial abuse of Canadians is not only tolerated when done by our giant financial institutions, but it appears to be “built in” to the system.

Doing financial harm to investment customers is now legally allowed, having removed the “customer interests must come first” provisions of a few years ago, and replaced them with a much lower standard of “suitability”, without informing the public about the change. “Suitable” is measured by the provider of the investment and is not only subject to his or her definition, in the case of “intangible” things such as investments, it can become nearly impossible to nail down accurately. They can thus sell almost anything and call it “suitable”.

The abusive of customers despite promises of professionalism, client first promises, etc, allows a
bullying treatment of elderly victims, first financially abusive, followed by corporate bullying for those customers (or employees) who refuse to be silent to financial abuse, and finally, many years of legal bullying by the financial industry for those with the strength to demand “fairness, honesty and good faith” from the worlds strongest financial institutions.

Legal concerns

Further to violations of the public. Some definitions which may be applicable to protect Canadians.
---Misleading Advertising Provisions of the Competition Act of Canada
--The false or misleading representations and deceptive marketing practices provisions of the Competition
Act contain a general prohibition against materially false or misleading representations.
--Bait and switch selling.....the marketing of professional “advisory” investment services, with the implication of a licensed, trained, and properly compensated professional with a duty to give advice that is in the best interest of the customer.....and then the delivery of a commission salesperson with no such license. Against the spirit and the intent of the Competition Act of Canada.
Section 74.04 of the Competition Act is a civil provision.
Section 74.04 was drafted in contemplation of situations where the person who advertises the product would be the same as the one who supplies it. ... .html#bait
Section 380 Criminal Code of Canada
--Fraud is proved when it is shown that a false representation has been made
(1) knowingly, or (2) without belief in its truth, or (3) recklessly, carless whether it be true or false.
--Competition Act of Canada
Marginal note: Misrepresentations to public
1 74.01 (1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever,
1 (a) makes a representation to the public that is false or misleading in a material respect; 2 ... ns#s-74.01
--What is a false pretence under the Criminal Code?
Under Section 361., (1), a false pretence is a representation of a matter of fact either present or past, made by words or otherwise, that is known by the person who makes it to be false and that is made with a fraudulent intent to induce the person to whom it is made to act on it. Subsection (2) states that exaggerated commendation or depreciation of the quality of anything is not a false pretence unless it is carried to such an extent that it amounts to a fraudulent misrepresentation of fact. For the purposes of subsection (2), it is a question of fact whether commendation or depreciation amounts to a fraudulent misrepresentation of fact.
Under the Criminal Code, every one who commits an offence under paragraph (1)(a) (a) is guilty of an indictable offence and liable to a term of imprisonment not exceeding ten years,
On quiet industry settlements:
Customers who make it through the five to ten years of financial abuse and trauma, to perhaps see a return of some money, are asked to sign confidentiality agreements, which then allow the harms done by financial firms to be kept secret, thus allowing them to continue those harms, for any other Canadian, one at a time. It is the perfect process to launder billions of dollars from the hands of the public, into the hands of the strongest financial institutions in the world and never be held accountable.
IIROC Rules and Standards:
(Investment Industry Regulatory Organization of Canada)
source IRROC 29.7A8
Link to source:
800.15. The purpose of these Rules is to spell out as far as practical what can be done under
these Rules without breaking the letter or the spirit of them. It is common knowledge that there are innumerable ways of circumventing the purposes of the Rules, but any such method so adopted can only be considered a direct contravention of the letter and spirit of these Rules and contrary to fair business practice.
source IIROC
Source Link: Ktype=445&linkType=toc&dbID=281205341&tocID=559
From the BCSC Securities Act (link 1) comes this;
Persons who must be registered
34 A person must not
(a) trade in a security or exchange contract, (b) act as an adviser,
(c) act as an investment fund manager, or
(8) Misleading Trade Name
No Dealer Member or Approved Person shall use any business or trade or style name that is deceptive, misleading or likely to deceive or mislead the public.
(d) act as an underwriter,
unless the person is registered in accordance with the regulations and in the category prescribed for the purpose of the activity.
If we are being honest, the two promises in the CSA (Canadian Securities Administrators) image above,
Protecting Investors” and “Maintaining confidence in Canada’s markets” are not met. I argue that the exact opposite is what Canada’s regulatory regime and investment industry is accomplishing. Time will tell.
14 ... f6d_en.pdf
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Tue Jan 29, 2013 4:06 pm

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Box 1651
Lake Cowichan BC
January 28, 2013
Rossana Di Lieto
Vice President Registration Complaints & Inquiries
Joe YassiVice President,
Business Conduct Compliance

To whom it may concern:

Re: Use of Business Titles and Financial Designations

I write as an individual investor in response to your open call for comments on the “Use of Business Titles and Financial Designations” with the following observations and concerns:

IIROC appears to already have clear regulations that speak to the use of Business Titles and Financial Designations from 29.7:
Misleading Trade Name
No Dealer Member or Approved Person shall use any business or trade or style name that is deceptive, misleading or likely to deceive or mislead the public.

Prohibition on use of Trade Name
The Corporation may prohibit a Dealer Member or Approved Person from using any business or trade or style name in a manner that is contrary to the provisions of this rule or is objectionable or contrary to the public interest.

In this country, “baking chip” companies cannot label their product chocolate chips if their product doesn’t contain chocolate, and ice cream without cream can only be labeled “frozen dessert.” I am confused and disappointed that you are calling for comments when you clearly have regulations which address how to represent your licenced members, a product with far more implications than our sundries.

Investors who do not have the skills or knowledge to invest by themselves choose an IIROC licenced representative because of the implied trust your regulatory body provides. IIROC firms and representatives that use titles and designations not approved by IIROC or other regulatory bodies is a deceptive practice against your regulations. This practice preys on investors with a lack of investment knowledge and increases their vulnerability.

When investors trust an IIROC licenced representative, they expect a higher level of accountability than someone who is un licenced, regardless of the IIROC business title or financial designation.

They trust that IIROC regulations will be followed. They expect that their accounts will be supervised and monitored for compliance with IIROC regulations. If at anytime, there is a lack of compliance, they expect that the firm and the individual representative will be held accountable for any damages.

As such, an IIROC licence in itself may suggest a fiduciary duty to investors, which IIROC may need to address by holding its registrants to a higher level of care. Anything less, and there is no reason to use an IIROC licenced representative or firm.

An area of additional concern that has not been addressed in your report is the use of misleading Headings in the common phone book. In the “Yellow Pages” from my local area, one can find IIROC investment firms under the heading “Financial Planning Consultants,” which have IIROC representatives who are not Certified Financial Planners. This heading is then repeated by several Internet search descriptors. This may be evident throughout many “Yellow Pages” in Canada. The choice of IIROC firms that do not have any certified financial planners to use this heading to solicit clients may suggest a fiduciary duty to investors who refer to IIROC representatives from that column instead of the other available and what may be a more accurate heading: “Investment Dealers.”

Investors are looking for investment firms and representatives they can trust. They are also looking for a regulatory board that backs up its regulations. Without this regulation, investors will become more independent and turn to ETF’s and self-directed investment solutions.

If investors cannot receive a trusted duty of care in their best interest from IIROC regulated firms, the investment advice industry will suffer. Thank you for considering my concerns and response to your call for public comments.
Mrs. Karen Kloske
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Mon Jan 14, 2013 9:45 am

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Journalist's book blisters advisers
Many irate over skewering of personal-finance industry, but some applaud

By Liz Skinner
January 13, 2013 12:01 am ET
A new book that criticizes the financial advice industry is being panned by many advisers, but surprisingly, others agree with at least some of its conclusions.

In “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry” (Portfolio/ Penguin, 2013), financial journalist Helaine Olen contends that the nation's 320,000 financial advisers have been selling Americans financial products and services that haven't provided the security that they have promised.

For example, investors who thought that they were playing it safe with “buy and hold” investment strategies watched in 2008 as their retirement expectations melted down along with the U.S. economy.

“We'd been sold a dream of savings and investing that had no basis in any history or reality,” Ms. Olen wrote.

“We were participants in a vast experiment, a hope that personal finance and investments would do it all for us,” she wrote.

“We now know that for all too many people, it did not.”

Ms. Olen, who used to write the “Money Makeover” feature for the Los Angeles Times, holds advisers' feet to the fire in her book. She briefly de-scribes the differences between the suitability standard by which brokerage industry representatives must abide and the fiduciary standard of registered investment advisers.

Ms. Olen contends that the public doesn't understand that brokers don't have to make sure that sales are in their clients' best interests and that people are completely confused by the 200-plus designations that financial professionals can choose to list on their business cards.


In an interview, Ms. Olen said that fee-only advisers who charge for their services and don't receive commissions or other third-party payments offer clients a better option. However, they tend to have investment minimums that most Americans will never reach.

“Their focus on wealth management leaves out a lot of us who aren't wealthy,” Ms. Olen said.

She said that her own adviser, whom she declined to name, is paid hourly, and she chose that model because such advisers are least conflicted.

Reaction to the book has been mixed among advisers. Many of the comments posted on criticized the book, but others supported Ms. Olen.

The Financial Services Instittute, the Financial Planning Association and the National Association of Personal Financial Advisors declined to comment on the book.

Sean Walters, executive director of the Investment Management Consultants Association, whose members are brokers and independent advisers, said that the financial advice industry serves “every stratum of the population.”

He said that the author's skewering of the entire industry in an attempt to sell more books “is a bit hypocritical.”

Former broker Michael Salker said that brokers have to disclose product fees by providing a prospectus to every customer who is offered a product, but “whether people read it or understand it is another thing.”

Now a fee-only adviser with MCS Financial Advisors LLC, he acknowledged that financial planning is difficult “for middle-class folks who don't have significant amounts of money and are constantly bombarded by financial products they don't understand.”

Fee-only financial adviser Karen Keatley of Keatley Wealth Management LLC said that Ms. Olen's book likely will add to the public's disenchantment with financial professionals.

Ms. Keatley said that the public is confused over who gives good advice and who doesn't.

“I work as a fiduciary for my clients, but I still have to show them I'm not here trying to rip them off,” she said.

In her book, Ms. Olen saves most of her harshest criticism for personal-finance celebrities such as Suze Orman and David Bach.

Ms. Olen writes that Ms. Orman's own riches weren't “earned by investment savvy or astute savings strategies but by convincing many of us that we were so helpless we needed the help of her books and product lines.”

Ms. Olen also targets Mr. Bach's “latte factor” approach found in his book, “The Automatic Millionaire” (Crown Business, 2005). It told Americans that they could save $1 million if they only swore off their $4 a day coffee beverages and saved up that money for 30 years.

Ms. Olen writes that a more realistic estimate of the amount one could save would be about $173,000.

Neither Ms. Orman nor Mr. Bach could be reached for comment, and e-mails to their public relations representatives weren't returned. Twitter: @skinnerliz ... _term=text
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Re: advisor fraud, professionals, or salespeople masqueradin

Postby admin » Sun Dec 30, 2012 11:16 am

Screen Shot 2012-12-30 at 11.06.08 AM.png

Understanding Misleading Financial Advisor Titles – Your Right to Know
Written by Bryan
Categories: Financial Services Tips and Caution

This past January, the Study on Investment Advisers and Broker-Dealers was released by the Securities and Exchange Commission (SEC). Among other issues, this 208-page document targeted the clear need for a uniform fiduciary standard that all advisors must adhere to. According to the study, “Retail customers should not have to parse through legal distinctions to determine whether the advice they receive is provided in accordance with their expectations or not.”

This report is a good first step in the right direction, but until real changes are made, which are most likely a long way down the road, investors still have to deal with the misleading titles that financial advisors are allowed to hide behind. Currently, all advisors do not adhere to a fiduciary standard. In fact, only a small percentage of those offering retirement planning, mutual fund information, and advising clients about investment choices are held to a fiduciary standard. What does this mean for the unwary investor? More often than not, the cloudy and confusing financial advisor titles lead clients to place their trust in an individual who has very different goals than the client. While the client’s goal may be to map out their best possible financial future, the non-fiduciary advisor (whose first commitment is to the broker-dealer they represent) is more interested in selling products that pull in a nice commission for themselves. This clear conflict of interest comes as a huge surprise to many investors who believe that all financial advisors play by the same rules.
Is it wrong that all advisors are not held to a fiduciary standard? Of course it, but now that you are aware of the problem, here’s how to protect yourself from financial salespeople hiding behind misleading titles.

The Two Vital Questions to Ask Your Financial Advisor

Before agreeing to work with any financial advisor, there are two preliminary questions to ask:

How are you compensated?

Whose interests are you required to put first? (or, Are you a fiduciary?) Be careful with this question. You’re not asking if they “believe” the customer’s interests should come first, you are asking if they hold the title of fiduciary. Hint: Most financial advisors, planners, and investment analysts are not fiduciaries.

If you can’t get past these two, there really isn’t any reason to discuss investment strategies, goals, risk tolerance or anything else. “You aren’t required to place my interests first? Ok, thank you…Goodbye.”

(advocate warning: get this answer in writing.....and get it on the letterhead of a solid firm (not just a verbal from a salesperson)

Here’s the breakdown of the two questions and what the answers reveal:

How is Your Financial Advisor Compensated?

It’s kind of a no-brainer to want to know how much you are paying for things, right? Whether it’s a dental bill, an insurance premium, or the check for dinner, the charges are clear and relatively simple to understand. Surprisingly, much of the financial services industry chooses to avoid full fee disclosure. Why? One can only assume that if charges are hidden, there’s a reason, and it isn’t good. One of the reasons financial advisors may choose to hide their fees is due to the fact that their clients may mistakenly believe the advice they are receiving is free. Alarming? Keep reading…

According to a survey conducted by Cerulli Associates research firm, 64% of investors involved in the study were not aware how their financial advisor was being compensated, and some even believed their financial advisor was providing services free of charge. Now keep in mind, this is not the general public; the survey was given to active investors
Most financial advisors are paid (by you) much more than you are aware of. How are they paid? Unless they are fee based only, your financial advisor is compensated by commission and bonuses directly tied to the financial products they are “advising” you to purchase. Could there be a conflict of interest here? You decide.

Keep in mind that most financial advisors are not fiduciaries and are not required to act in your best interest. Their real commitment is to the brokerage firm, not the clients.

What Are Your Financial Advisor’s Credentials?
Until the proposed changes take place, titles of financial advisors remain misleading. Registered Investment Advisors and Registered Fiduciary™ are two titles that can not be tacked onto the end of an advisor’s name at will. RIA’s and RF’s are fiduciaries, and are required by law to place the best interests of their clients ahead of their own.

On the other hand, financial advisors, wealth managers, senior financial planners, financial analysts, and investment managers are just a short list of titles that salespeople like to adopt, in an effort to steer clear of the “salesperson” stigma. Let’s face it, today’s brokers or financial salespeople are competing in a tough market and they are doing whatever they can, within the limits of the law, to build their client base. Unfortunately, the terms grossly represent who they actually are and ill-informed investors mistakenly believe that these salespeople do have a fiduciary duty.

Bottom line? Find out if your financial advisor is a Registered Fiduciary™ or a Registered Investment Advisor. If not, it may be time to look for a new advisor who is held to a fiduciary standard.

Fiduciary financial advisors are bound by five core fiduciary principles:
1. Put the best interest of the client first
2. Act with prudence—that is with the skill, care, diligence and good judgment of a professional
3. Do not mislead clients. Provide conspicuous, full and fair disclosure of all important facts
4. Avoid conflicts of interest
5. Fully disclose and fairly manage, in the client’s favor, unavoidable conflicts

Laying the Right Foundation
By choosing the right professional (with the right motives), you will be positioning yourself for success. On the other hand, relying on an individual with a misleading title who is not required to put your interests first really makes no sense at all.

For more information on fiduciary standards, see Protecting Yourself from Financial Salespeople. If you are currently working with a financial advisor, you have a right to full disclosure of fees. Print out our handy form and have your current advisor fill it out and sign: Full Disclosure and Transparency Fee Chart.
Remember, it’s your money and your financial future. Laying the right foundation begins with the right information.

Bryan Binkholder, The Financial Coach, is a registered investment advisor, radio personality, author and motivational speaker. He is best known for breaking through the confusion and exposing the misdeeds of the financial services industry and Wall Street. For more insights, financial tips and ways to protect your wealth, continue to follow Bryan’s blog. You’ll also want to take advantage of two popular resources: 7 Deadly Traps of Investing and The Six Pitfalls of Retirement Planning. ... ht-to-know
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