Tricks of the Trade. Sales tricks, investment abuses.

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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Thu Dec 19, 2019 3:48 pm

IG settles with MFDA over suitability of DSC sales to elderly clients

The hearing involved two clients over age 90 sold DSC funds with seven-year redemption schedules

By: James Langton May 17, 2019 13:13

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The dealer arm of fund industry giant Investors Group, which has since abandoned deferred sales charges (DSCs), has settled regulators’ allegations that it failed to properly review a couple of instances when reps put elderly clients into DSC funds.

A hearing panel of the Mutual Fund Dealers Association of Canada (MFDA) approved a settlement with Investors Group Financial Services Inc. that will see the firm pay a $150,000 fine and $15,000 in costs to settle allegations that it violated MFDA rules by failing to adequately query the suitability of two clients over 90 years old being sold DSC funds with seven-year redemption schedules.


In both cases, the clients died less than two years later and their estates were obliged to pay DSCs. The firm has since reimbursed both estates for the redemption fees.


According to the settlement, one 92-year-old client put the bulk of the proceeds from selling her condo into DSC funds. Her KYC information listed her as having a high risk tolerance and an investment horizon of over 10 years.

The settlement notes that the firm’s compliance department queried the suitability of the trades but accepted assurances that the DSC fees had been disclosed to the client, without independently assessing whether the funds were suitable.

The other instance involved a 95-year-old client who was also put into DSC funds with a seven-year redemption schedule. Once again, the suitability of the trades was initially questioned by compliance but allowed to proceed anyway.

Since these instances, the firm adopted enhanced suitability reviews for any DSC purchase involving a client over 70 and began waiving DSC fees for estates of deceased clients. In 2017, IG stopped selling DSC funds altogether.
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Thu Dec 19, 2019 3:46 pm

https://www.investmentexecutive.com/new ... t-ontario/

CSA to ban DSCs everywhere but Ontario

Ontario is considering alternatives to a DSC ban, but will join the CSA in outlawing trailers for discount brokers

By: James Langton December 19, 2019 10:00


Ontario will remain a holdout, but the rest of Canada’s securities regulators are moving ahead to ban deferred sales charges (DSCs).

The Canadian Securities Administrators (CSA) have announced that they intend to publish a final set of rule changes in 2020 that will effectively outlaw DSCs and eliminate the practice of paying trailer fees to discount brokers — but Ontario is only on board with the action on trailers.

Specifically, the CSA said that it intends to ban the payment of upfront sales commissions from fund companies to dealers, “which would lead to the end of the [DSC] option and associated redemption fees.”
“The ban on upfront sales commissions from investment funds to dealers will eliminate an incentive for dealers to recommend investment products that provide them with an upfront commission from the fund company, instead of recommending other suitable investments that have lower costs and do not have redemption fees,” the CSA said in a notice spelling out its plans.

Ontario’s government, which opposes a ban on DSCs, will not be enacting the change in that province.

Instead, the the Ontario Securities Commission (OSC) said in its own notice that it’s continuing to consider alternatives to an outright ban, such as placing restrictions on the use of DSCs to “mitigate negative investor outcomes.”

Possible restrictions include banning DSC sales to seniors; limiting redemption fee schedules; banning leveraged DSC sales; setting account-size limits; and allowing hardship exceptions from redemption penalties.

In the meantime, the OSC will be joining the rest of the CSA in banning the payment of trailers to discount brokers.

“The ban on trailing commissions to certain dealers will end the charging of fees for advice that those brokers do not provide,” the CSA said.

The planned rule changes banning upfront sales commissions will be published in early 2020, and the changes banning the payment of trailers to discounters will be published later in the year.

“These expected rule changes, together with new conflict-of-interest rules that are being implemented under our Client Focused Reforms, will bring greater transparency to the fees paid by investors when they buy mutual funds,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers, in a statement.

The regulators said that they expect both bans will have a transition period of at least two years.

Once the planned DSC ban takes effect, fund firms will not be allowed to make new sales using the DSC option, the CSA said. The redemption schedules on funds sold via DSC before the ban is adopted will be allowed to run their course.

RELATED NEWS
OSC decision on DSCs to come — eventually
IG settles with MFDA over suitability of DSC sales to elderly clients
IIROC allows full-service reps to tout firm’s discount brokerage
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Mon Dec 26, 2016 11:22 am

http://thebamalliance.com/blog/the-fair ... -products/

By Larry Swedroe

Screen Shot 2016-12-26 at 11.21.27 AM.png


One of the most well-known and most beloved forms of literature is the fairy tale. Although not every fairy tale is actually about fairies, they do tend to be fictitious and highly fanciful tales of fabled deeds and creatures. They are frequently derived from oral folklore based on myths and legends. And fairy tales are usually intended for children.

One of the most popular fairy tales is the Grimm Brothers’ Snow White. In the story, to eliminate her competition for “fairest in the land,” the evil Queen Maleficent disguises herself as an old woman and offers Snow White a beautiful, shiny red apple. Despite a stern warning from the Seven Dwarfs, Snow White cannot resist the temptation of the apple. She takes the bite that sends her into a deep sleep.

Adult Fairy Tales

Wall Street’s product machine is continuously pumping out fairy tales. Indeed, its product innovations can also often be called “fanciful tales of fabled deeds.” The only difference is that they are designed for adults. Like the poisoned apple, they have shiny features designed to entice naive investors.

Despite the wide variety of “fanciful tales” available, nearly all of them have one thing in common: Although they look appealing to investors, they have attributes that make them much more attractive in reality to the seller than to the buyer. Typically, these products fall into the category of what are referred to as “structured products.”

Structured products are packages of synthetic investment instruments specifically designed to appeal to certain needs that investors perceive aren’t being met by other available securities. They are often packaged as asset allocation tools that can be used to reduce portfolio risk.

Structured products usually consist of a note and a derivative, meaning the product derives its economic value by reference to the price of another asset, typically a bond, equity, currency or commodity. That derivative is often an option (a put or a call). The structured note pays the interest at a set rate and schedule, and the derivative establishes payment at maturity.

Because of the derivative component, structured products are often marketed to investors as debt securities. Depending on the variety of structured product, full protection of the principal invested is sometimes offered. In other cases, only limited protection may be offered, or even no protection at all.

Over the past decade, structured investment products, also known as equity- or index-linked notes, have become increasingly common in the portfolios of retail investors. The 2016 Greenwich Associates survey of structured products reported nearly $60 billion worth are now being sold each year, and that suppliers are forecasting strong growth in the future. Among the biggest suppliers of structured products are HSBC, J.P. Morgan, Barclays, Goldman Sachs, Credit Suisse and BNP Paribas.

And this is not just a U.S. phenomenon. In some countries (such as Switzerland and Germany), approximately 6% of all financial assets are now held in structured products. Unfortunately, they remain “popular” for the same reasons many financial products are popular: either they carry large commissions for the sellers, or they so greatly favor the issuers that they are pushed on unsophisticated investors who cannot fathom the complexity (but are assured by the salespeople and advertising collateral that these are good and often safe products).

A Question Of Exploitation

Fortunately, there’s a substantial amount of research on structured products. We know, for instance, that sophisticated issuers create them because they lower their costs of capital and generate profits. Thus, whenever an individual investor buys a complex instrument from Wall Street, you can be sure they are being exploited.

The reason is simple: If the issuer could raise capital more cheaply with a straightforward, simple debt instrument, they would do so. Thus, the question isn’t whether or not an investor is being taken advantage of. The only question is: How badly is the investor being exploited?

Stefan Hunt, Neil Stewart and Redis Zaliauskas contribute to the literature on structured products through their March 2015 paper, “Two Plus Two Makes Five? Survey Evidence That Investors Overvalue Structured Deposits.”

The paper was written for the U.K.’s Financial Conduct Authority (FCA), which is “committed to encouraging debate among academics, practitioners and policymakers in all aspects of financial regulation.” Hunt and Zaliauskas are in the chief economist’s department of the FCA, and Stewart is a professor at the University of Warwick’s department of psychology.

The authors begin by noting: “Innovation in retail financial markets has led to increasing product complexity over the past two decades, but there is little evidence of a comparable increase in consumers’ financial capability. Over the same period, there have been numerous instances of mis-selling that have led to regulatory action in the UK. When examining whether the market for a particular complex financial product is working well, one of the things regulators need to ask is whether consumers can understand and adequately assess the products they consider buying.”

Later, Hunt, Stewart and Zaliauskas write: “The FCA has repeatedly fined structured product providers and voiced concerns about market practices, indicating that the market is not working well for investors. The fines imposed on a major provider of retail structured products, in 2011 and 2014, were related to failings in sales of structured capital at risk products and to misleading promotions of structured deposits.”

In other words, the purpose of their paper was to investigate how well consumers understand and value structured deposits, whether there are systematic biases in investors’ evaluation of the expected performance of the structured deposits, and whether providing targeted information improves this evaluation.

A Study Based On A Survey

Hunt, Stewart and Zaliauskas conducted a survey of 384 retail investors who had relatively well-diversified portfolios and who had previously bought or would consider buying structured deposits or other structured products. The authors showed the investors hypothetical examples of five popular types of structured products with returns linked to the performance of the FTSE 100 stock index.

To distinguish between expected returns driven by overall optimism about the market and difficulty in understanding how structured deposit returns derive from an underlying index, they asked investors about their views on the performance of the FTSE 100 index over the next five years.

The authors then compared investors’ expectations about FTSE 100 returns with the returns they expected from different structured products. This allowed them to calculate bias in how investors evaluate the structured deposits relative to the index. They next asked investors to rank the structured deposits against a range of fixed-rate deposits, taking into account the risk of the different structured deposits. Finally, they looked at whether various types of disclosures altered respondents’ valuations. Following is a summary of their findings:

While investors’ expectations of the FTSE 100’s growth were, on average, well-aligned with the assumptions used in the author’s quantitative model, investors significantly overestimated the expected returns of all structured deposits, even the most simple.
Investors overestimated expected product returns by 1.9 percentage points per year on average, adding up to 9.7 percentage points over the five-year term.
Investors’ expectations were also significantly higher than the returns from the authors’ quantitative model.
Returns were overestimated for all five products. The overestimation ranged from 1% to 2.5%, figures that are statistically significant. Only 1.6% of respondents did not overestimate any of the products’ returns, while 70% of respondents overestimated all of the products’ returns, leading to the products’ returns being overestimated in 86% of cases.
Although all five structured deposits in the survey would have been unlikely to return more than simple fixed-term cash deposits, investors didn’t recognize this. In other words, they didn’t require a premium for the incremental risks of the products. Investors were valuing structured products as if they were risk-free.
Once again demonstrating that overconfidence is an all-too-human trait, those thinking of themselves as above-average financial experts were 0.44 percentage points less accurate in translating their FTSE 100 expectations into product returns.
The disclosure of likely product returns and risk had some effect on investors’ ability to adjust for initial incorrect valuations. Investors who had initially overestimated returns or underestimated the risk of returns were more likely to adjust their valuations following further information.
“Scenario” disclosures (giving investors information about what would happen under hypothetical scenarios) had little effect on product revaluation, while quantitative model returns (telling investors the likely product returns based on the authors’ quantitative model) induced, on average, a 0.41 percentage point larger devaluation of structured deposits.
The authors also noted that “an FCA analysis of a large sample of UK retail structured products, including but not limited to those based on the FTSE index, suggested that products issued since 2008 and that had a maturity of three to five years on average underperformed National Savings & Investments five-year deposit rates.”

Hunt, Stewart and Zaliauskas concluded that behavioral biases, combined with features of structured deposits that can exploit these biases, lead investors to possess unrealistically high expectations of the products’ returns and impede their ability to evaluate and compare structured products to each other and against other deposit-based alternatives.

What’s more, these products’ design and distribution strategies (often using commission-driven salesforces) exploit consumer weaknesses, likely leading consumers to make mistakes in comparing the options and, thus, buy overpriced products. Sadly, they also concluded: “Our findings suggest that there are limits to how much can be solved just by providing information.”

The authors’ findings are entirely consistent with prior research on structured notes, which we will explore in more detail in upcoming articles.
http://thebamalliance.com/blog/the-fair ... -products/

Larry Swedroe, Director of Research
Director of Research
Larry Swedroe is director of research for the BAM ALLIANCE.

Previously, Larry was vice chairman of Prudential Home Mortgage. Larry holds an MBA in finance and investment from NYU, and a bachelor’s degree in finance from Baruch College.

To help inform investors about the evidence-based investing approach, he was among the first authors to publish a book that explained evidence-based investing in layman’s terms — The Only Guide to a Winning Investment Strategy You’ll Ever Need. He has authored six more books:

What Wall Street Doesn’t Want You to Know (2001)
Rational Investing in Irrational Times (2002)
The Successful Investor Today (2003)
Wise Investing Made Simple (2007)
Wise Investing Made Simpler (2010)
The Quest for Alpha (2011)

He also co-authored four books: The Only Guide to a Winning Bond Strategy You’ll Ever Need (2006), The Only Guide to Alternative Investments You’ll Ever Need (2008), The Only Guide You’ll Ever Need for the Right Financial Plan (2010) and Investment Mistakes Even Smart Investors Make and How to Avoid Them (2012). Larry also writes blogs for MutualFunds.com and Index Investor Corner on ETF.com.
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Fri Apr 03, 2015 4:34 pm

deception.jpg


Top 9 broker/dealer secrets, hidden from investors:  (updated as to April Fools day, 2015:)

9 things the “advisor” and investment dealer are incentivized to hide:


hide the exact license and registration category of the so-called “advisor”
hide the difference between an“adviser” license and an “advisor” title. One is law, one is “unregulated”. (lawless)


conceal the exact duty of care (or lack of) with clever marketing words


hide the undisclosed “dual-agency” conflict, which puts broker/dealer interests ahead of the customer.


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hide the fact that the “titled” advisor has loopholes to NOT have to place the interests of the client first and foremost, nor to have to protect from harm.


hide the word “fiduciary” (the “do-no-harm” type of loyalty to client interests) but cleverly use marketing words to imply such professional duty does exist.


hide the fact that the new account application (KYC) form is designed in favor of protection of the dealer/salesperson over customer protection


hide the fact that this rigged KYC can and will be used against you as the key document in court to dismiss any claims you have of impropriety


hide the fact that the “suitability” obligation (another suitably vague but clever marketing word) is as protective of you as is a word like “edible”. 
(eg.  “All the meat products in our vending carts is considered “edible”:)


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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Sun Jul 20, 2014 8:17 am

10337719_713049895418825_5359317003785580537_n.jpg
KYC The KNOW YOUR CUSTOMER/CLIENT FORM (KYC)

This KYC is the "holy grail" of documents, refereed to as such by experts in court, and used extensively by the investment industry to defend and deflect consumer complaints against investment dealers. (see this link to the Mutual Fund Dealers Assoc of Canada on the KYC: [url]http://www.mfda.ca/regulation/bulletins14/Bulletin0611-C.pdf
[/url]

I have both filled it out, as a salesperson, and seen how "every word can and will be used" to harm and entrap consumers, although it took ten or twenty years to see how this worked……..here is my view of it after a few decades……thanks to Ken Kivenko at http://www.canadianfundwatch.com for his ongoing efforts to improve fairness for investment consumers and for prompting this little story from me:


My experience with the KYC from inside the industry is this:

All KYC completions are done by persons who truthfully are "salespersons", (broker is the equivalent registration category in the US) but at the exact moment of completion of the KYC, at the very beginning of a newly formed "trust" relationship, the salesperson has succeeded in misrepresenting themselves to the unsuspecting customer as a professional "advisor". This taints the process from the beginning and is the first required step in a well planned deceit of the public.

(This is an industry-wide practice done to sidestep the distrust and caution that customers have for people who call themselves by any word which might mean "salesperson". Regulators typically look the other way at this deceit or misrepresentation, making them an essential element in the known abuse of investors.)

Thus both parties are of a completely different understanding of the relationship from the outset, only the salesperson/"advisor" is aware of the misrepresentation and the customer is unaware. As a Financial Post article by Ed Waitzer pointed out a while back, it is a fraud of both parties are not of the same understanding, if the customer is being sold something "other" that what they believe they are being promised. (note 7 below)

This leads to the customer following the "advice" of the salesperson like I would follow advice from my doctor about a medical treatment that would be best for me……..which of course leads back to the subjective questions in the KYC (risk, objectives etc) being "coached in advance" by the salesperson/advisor to be completed in exactly the manner most beneficial to the investment dealer and salesperson/advisor.
(salesperson knowing in advance of the customer what type of products generate the salesperson and the firm the greatest incentives/rewards)

(imagine signing a risk disclosure form for a medical operation, and years later, (perhaps never) learning that the "Doctor" who urged you into this procedure was at no time a licenced "doctor" and was in fact urging you towards the most expensive or riskiest procedure for his own benefit……..simple and criminal fraud would be how this works if it were in the medical profession……yet allowed daily in finance)


Fast forward several years down the road and I see a 90 year old man sitting in a court room, being badgered by lawyers from an investment firm. (true case on public record)

The 90 year old investment victim knows he has been taken advantage of…….yet does not quite know how the "magic trick" works…….he is still years away from figuring it out.

I sit in the courtroom, as an expert wittiness, charged with the responsibility to "help" or "inform" the court, and despite my best efforts, I find that sometimes a courtroom is where the truth goes to hide. Unless asked exactly the correct question, at the right time, the expert is NOT allowed to simply "point out" the problem to the court. That would be acting as they call an "advocate" and sometimes the truth in this form is not welcome.

The court is doing what courts do as best they can, and part of this is taking words said by the investment industry, particularly, investment authorities as gospel……they are, after all the highest moral authority on the matter…...

What is evident is that the 90 year old victim is being abused a THIRD time. First was the misrepresentation, second was abusing his investment monies and returns, and third is the clever use of the courts to outwit and "out-trickery" the client/victim out of justice. (every victim learns this the hard way, and every investment firm learned this so well decades ago…..another "asymmetry of information" being put to use to financially abuse consumers)

I have the urge to stand up and yell out
" the KYC is a useless document and should NEVER be refereed to in this court, since it was tainted from the very beginning……by a misrepresentation…….by fraud……
....the old man had no idea he was dealing with a mere salesperson in the disguise of a financial professional. He was led every step of the way into a position of total trust and total vulnerability in the financial services of the firm and the "advisor".

But of course, this amount of truth is not welcomed just when needed, in the court, and decorum must be maintained, even at the expense of justice………..such unvarnished truth may never be revealed. The dance of the law must be followed in exact but bewildering steps it seems, to an outsider.

The KYC is thus in many many cases, simply the fruit of a tainted tree. It is another "magic trick" so cleverly done
, …...that unless one has stood in exactly the shoes I have stood in, and seen over ten or twenty years, the setup, the inside story, and the ending in a B.C. courtroom………one would never know how tainted and easily corrupted (by and for the experts, never by the investor) the simple KYC actually is.

I guess what I am saying is these things which investors are usually kept in the dark over:

1. Anything you say to an "advisor" even one who is faking it, and who is not registered as an "advisor", can and will be used against you in a court of law by the dealer involved who gets your money...by the fakery.

2. Garbage in equals garbage out, with your money as the lesson learned……

3. An example of how we take your money and our experience, and make it our money, and your experience (investment dealer inside joke)

4. Regulators are respected by the courts as "they are, after all the highest moral authority on the matter……". This is part of the ruse, and society needs to learn and understand that the "regulator" game, is now as suspect, and as nearly as easily faked, as is the "advisor" title. Some regulators today might be more correctly called "lobbyists", or as one US Senator calls them, "a self defence mechanism for the industry".


Larry Elford, former CFP, CIM, FCSI Associate Portfolio Manager

http://www.investment-bodyguard.com

7. Lastly: From “Understanding Misleading Financial Advisor Titles – Your Right to Know” Bryon C. Binkholder
"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.
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Mon Jul 07, 2014 10:04 am

"LETS ALL PLAY A NAME GAME WITH YOUR MONEY…………AND WE WILL KEEP THE RULES TO OURSELVES ……..AND SECRET FROM YOU!!"

BAD ADVISOR.jpg


Because the financial industry makes billions by hiding certain essential items of info from the public, (asymmetry of information) while profiting from same…….I am on a fools errand to try and balance the playing field just a bit. Here is an example of the stakes at risk to North American society: (from SEC Investor Advocate Report, page 15, will link below): "

The number of SEC-registered advisers (note the spelling) has grown by approximately 40 percent over the past decade to nearly 11,500 today. The amount of assets managed by investment advisers is on an even steeper ascent, going from $20 trillion a decade ago to an estimated $55 trillion by the end of Fiscal Year 2015."


Compare this to the 500,000 "advisors" (again note the spelling) (USA number, plus another 150,000 in Canada) who are: (a) Not licensed as advisor OR adviser, with the SEC (b) not fiduciary obligated to work in best interests of customers, simply "using" a non-registered "title" which is remarkably similar to the registered class; (non registered advisor vs registered adviser), (c ) not clearly informing consumers of how this little name game works against them.

From Page 10 of same SEC report:
"January 2014 Gallup survey found that about half of investors were wary of investing in the stock market at the time—despite recent market gains. Moreover, the same survey found that the percentage of American households that own securities (either directly or through a mutual fund or self-directed retirement account) has declined from approximately 65 percent in April 2007 to approximately 54 percent in January 2014. If true, this decline in individual invest­ ment could constitute a significant drag on capital formation and the U.S. economy."


If the SEC (and 13 Canadian securities commissions) would simply follow good practices of public disclosure, as page 12 suggests:

EFFECTIVE DISCLOSURE
Disclosure is at the very heart of our system of securities regulation in the United States. In the offer or sale of securities, all material facts must be disclosed to investors so they can make fully informed investment decisions. Enforcing these disclosure requirements is a critical element of investor protection.
Ideally, issuers and sellers of securities should provide information to investors in a manner that enhances investors’ ability to understand it. Full and accurate information should be provided in a meaningful way, without unnecessary repetition and without burying important information within less important disclosures.


Thus, in North America (and elsewhere) there are two classes of investors. The extremely wealthy, able to access the small number of true investment "adviser" professionals, who help them to become wealthier………or the average retail mom and pop investor, given a non fiduciary, non-registered "advisor" (simply a miss-spelled error, right…:) who is basically a salesperson in disguise. The retail investor is being "cleaned out". His or her wealth legally "laundered" by salespersons and dealers, with the aid of blind and timid regulators who are able to act above not only principles of human decency, but also above all application of criminal codes. (Fraud, breach of trust, false pretence, etc., etc)

Shame on those in the industry who know of this game, and play along for self protection while the public is being cheated.

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http://www.sec.gov/reportspubs/annual-r ... fy2015.pdf
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Sun Jun 29, 2014 10:33 am

THE WORLD"S BEST INVESTMENT TRAP ILLUSTRATED..........3 Simple steps, 85 words
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the "foundational" issues of investment dealer deceit…….. 1. A very strong promise or implication of professional fiduciary duty owed to the investor……………2. With a lack of written fiduciary requirement, making it undeliverable (most often by design)…………….3. With resulting sale of extremely low suitability products, thus meeting a second industry trap, the suitability trap

3 Simple investment industry steps with the end result that the unsuspecting investor's retirement being cut by half, more or less, and the dealer and advisor splitting the other half………..


=====================

Stan Buell and I are just starting to figure out the "key" to raising public awareness. One of the roadblocks is to find the simplified way to describe it, (like"big warnings on cigarette packages" ) and the second roadblock (we feel) is that the media is financially captured to the ad revenues of the industry and cannot afford to offend. Perhaps a third roadblock is that regulators are also somewhat captured and loyal to the industry.


Comment from an informed investment victim:
"When someone came to me for advice about an advisor, she told me he said the fiduciary duty was implied by regulations, therefore he didn't need to have a fiduciary agreement with her." (he is entirely right about the implied fiduciary relationship, and we DO owe one if conditions/requirements are judged properly…..trouble is investment dealers have prepared well in advance for this trap, while the unsuspecting client is not even aware they are walking into a trap…….dealers win every time when they do not do anything stupid……."just criminal" works very well within our legal system if it is done properly…….:)

Below are some of my recent TWEETS to further the discussion, find me here @recoveredbroker :

Some hard investing truths are not allowed in commercial media. Here's one. Hiding investment deception in plain sight. http://buff.ly/1kCedjg

"if you invest without having a written fiduciary duty to protect you......then you can be mere "prey" to any investment dealer today."

You wouldn't go to a doctor who earns a commission on every prescription. Why treat your finances with less respect? http://buff.ly/PPtu2j

Sure it's nothing personal, but @DanSolin says Canadian investors are mostly losers http://ow.ly/yqIPV

simple investing story..,Two couples walk into separate restaurants for a meal with wine.... http://buff.ly/1hblgbj

CBC hidden camera investigation into financial "advisors". Buyer beware worth the repeat 2 min http://buff.ly/1tOQTOK

Can I end here by simply repeating (for my own benefit) the "foundational" issues of investment dealer deceit…….. 1. A very strong promise or implication of professional fiduciary duty owed to the investor……………2. With a lack of written fiduciary requirement, making it undeliverable (by design)…………….3. With resulting sale of extremely low suitability products, thus meeting a second industry trap, the suitability trap

3 Simple investment industry steps with the end result that the unsuspecting investor's retirement being cut by half, more or less, and the dealer and advisor splitting the other half………..

k-bigpic.jpg


For those who prefer more of a visual narrative here is this recovering broker's perspective after 30 years experience..... http://youtu.be/KH6XMXlfdBw

For the perspective of another industry expert, see short but concise article from a PH.d. former hedge fund industry expert: http://www.moneygeek.ca/weblog/2014/06/ ... ign=buffer
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Sun Apr 20, 2014 8:25 am

3D INVESTING



THE THREE D PROBLEMS INVESTORS FACE



DECEIT – DISCLOSURE – DESTRUCTION OF CAPITAL

BAD ADVISOR.jpg


DECEIT



Deceit starts with regulators creating the perception that they provide investor protection. They clarify this by saying the protection they provide is preventative in nature. However it is not possible to prevent all wrongdoing so victims are left to fend for themselves.



The second major deceit also starts with the regulators. They allow a Sales Person to call themselves an “Advisor” and mislead investors into believing they are competent to give advice and can be trusted.



DISCLOSURE



Disclosure, or more correctly the lack of disclosure is a fundamental reason investors lose their savings. Sales Persons eager to sell commission producing products fail to disclose that they are not qualified Advisers who can give advice but are really a sales person motivated by commission selling products. They do not disclose that there is no requirement for them to look after your best interests and that they are only required to sell you “suitable” products.



The second major failure to disclose the total amount of fees investors pay for their investments.



The third major failure to disclose the annual rate on each investment and the total account.



The fourth major failure to disclose is the detail on each product and the associated risk. Although an effort was made to provide a Point of Sale (POS) disclosure for mutual funds. Industry push-back resulted in the POS disclosure being downgrade to Fund Facts that are not provided until after the sale.



DESTRUCTION OF CAPITAL



How many Canadians are experiencing the destruction of their capital? Estimates are ranging from a low of $25,000,000,000 per year to upwards of $80,000,000,000 per year. The actual figure will remain unknown as these figures are covered up an not disclosed so the public perception of the industry will not be tarnished.



Canadians are misled by the regulators and the industry into trusting the Sales People motivated by commissions because of the deception and lack of disclosure. They continue to invest even though their capital is diminishing because lack of disclosure does not reveal their capital is being eroded. When they do perceive this erosion they receive assurance that it is only the market. It is often only when their capital is completely gone that they become aware. Then it’s too late.



THE SOLUTION



Canadians need to become aware of the facts so the perception can be dispelled. Only then will they be able to take action to protect themselves. Yes, it is a Buyer Beware investment world.



There are two solutions:

Become a Do It Yourself investor. This will take some time to learn the essentials. Very little so you can get started and stay with fundamentals.
Engage a Portfolio Manager registered as an “Advising Representative”. He will have a fiduciary responsibility and will look after your investments. Many will require accounts to be $50,000 and upwards.


A WORD OF CAUTION



All Canadians should check the registration of their “Advisor” or proposed “Advisor”. There are two main categories:

1. Dealing Representative - A sales person – what they can sell depends on the firm they work for and their registration.

2. Advising Representative - A person who provides advice on securities to clients. They can manage your

investment portfolio according to your instructions. They can also make decisions

If your “Advisor” is “A sales person” you must look elsewhere,



All investors must check their portfolio annual rate of return and compare it to a benchmark. If you are invested in funds or equities the Toronto Stock Exchange is a good start as a guideline.

Submitted by SIPA founder Stan Buell, April 20th, 2014 http://www.sipa.ca (Small Investor Protection Association)
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Sat Apr 12, 2014 9:18 am

A simple story to illustrate the difference of dealing with a "fiduciary" adviser, or a "commission sales" advisor.

Two separate couples walk into separate restaurants for a nice meal with wine.......

Harwoods-dinner-couple.jpg


The couple with a "fiduciary-type" wine steward are helped by the expert, to choose the very best wine available, the perfect selection at the perfect price. They pay him a fee, a "tip" if you will, for his services, which amounts to a minor percentage of their total dinner meal. They get the best wine experience for $180 and are treated fairly.

That is what it is like to have an investment experience with a true fiduciary adviser, one whose license actually says "adviser" on it. You will often find these people in the book, under a title called "portfolio manager".

Now for the other couple: They dine with a server who is a "commission-sales" type of wine steward and end up being "advised" to buy the "very premium brand", paying $500 for a bottle that they later learn to be the "house brand", made on the premises and placed into the fanciest bottle with the fanciest name. It is of poor quality from a dubious source.

The steward on commission, pockets exactly half of the commission on the house brand wine, which is a 50% commission, earning himself $250 for pushing this product on the couple.

The wine is mediocre to poor, and all that the restaurant and the steward care about is the commission to the steward and the huge markup to the restaurant. The couple pay more than twice more, and get a far inferior product. Welcome to the game of "commission paid advisors". I worked in this industry for twenty years (the investment side, not the wine) and I saw this go on every day. Day after day.

Picture%204.png

The image shown is the Canadian sales stats from the Investment Funds Institute of Canada for sales of mutual funds in 2007. The portion shown in RED are "WRAP" funds, which consist of "house brand" funds as well as some products which are "funds of funds". (which have fees on top of fees:) The commission product pushers calling themselves "advisor's" are NOT on the side of the customer, in most cases.


1980_2009_08_035.JPG

Below is a perfectly written story by a Forbes writer, which also illustrates the commission sales "advisor" tricks of the trade. Clever "advisors" moving a nice elderly woman from her blue chip, non-fee, portfolio, into positions which enrich themselves......it is the most common theme in the industry and it hurts the public.

Screen Shot 2014-04-12 at 10.22.42 AM.png

Wrap Account Ripoff
In 2007 Josephine DesParte, an 88-year-old Chicago widow, had $8 million tucked into an account at William Blair & Co. One-quarter of it was in municipal bond funds and cash and the rest in three stocks dear to her heart: Dun & Bradstreet , DesParte’s longtime employer, and those of spinoffs Moody’s and IMS Health. Together the securities were generating more than $100,000 in annual dividend and interest income.

DesParte’s coupon-clipping strategy made good sense for the widow, but she claims the inactivity made the commission-based account a dud for William Blair. In October 2007 brokers Brian L. Kasal and William H. Ross persuaded DesParte to begin selling her stocks and many of her bonds and to diversify into a number of blue chips.

They also moved her into a wrap account, which, DesParte would later claim, gave William Blair the advantage of shaving off 1.5% of her assets a year, or $120,000, in annual fees. The brokers’ moves further saddled her with a $322,000 capital gains tax bill for 2007, DesParte claimed.

DesParte filed a $2 million claim with the Financial Industry Regulatory Authority seeking compensation for wrongful investment losses and taxes. She was awarded $1.1 million last November. William Blair denies wrongdoing and declines comment. The two brokers also deny wrongdoing and have moved to Morgan Stanley .

“We’ve seen a real surge in claims related to fee-based accounts in the last year or so,” says Andrew Stoltmann, DesParte’s attorney. “The overwhelming majority of clients are over the age of 60, and a lot of them are 70- to 80-year-olds. They’ve got large accounts and don’t trade much, which means they’re unprofitable as commission-based clients.”

Fee-based accounts, commonly referred to as wrap accounts, popped up two decades ago as antidotes to churning. A broker earning an annual percentage fee for his firm will presumably not be badgering clients into trading excessively to gin up commissions. But the switch in fees does not eliminate the conflict between the broker’s interests and his clients’. A lot of them would be better off buying and holding than paying either commissions or annual fees.

For brokers and their employers, wraps are something of a holy grail, generating fees that are little affected by trading volume or even whether clients make or lose money. Such advantages for the salesmen may help explain why assets in wrap accounts are up 50% over the past five years to $1.8 trillion, according to Cerulli Associates.

DesParte’s case illustrates the potential pitfalls of wraps. With her, William Blair’s fee schedule called for charging 1.5% annually on equity holdings and 0.35% on bonds, which, Desparte claimed, totaled $85,000 a year, based on her original portfolio. By replacing her munis with equities, DesParte claims Blair hiked its fees by $35,000 a year; Blair contests the amount and says fees did not motivate it. Blair had an additional hidden agenda as “a marketmaker in virtually every equity position purchased,” which meant it stood to earn a bid/ask spread on each transaction, DesParte claims.

Some big investors are receiving similar treatment these days. Vermont’s Burlington Employees’ Retirement System filed a Finra claim in February accusing Morgan Stanley, its former investment advisor, of secretly clipping it on each trade, in addition to levying wrap fees.
http://www.forbes.com/forbes/2010/0412/ ... u-off.html


Check your "advisor" license here for USA: FINRA Broker Check http://www.finra.org/Investors/ToolsCal ... okerCheck/

Check your "advisor" license here for Canada: http://www.securities-administrators.ca ... spx?id=850

If your "advisor" is licensed as a "broker" in the US, or a "dealing representative" in Canada, then you have a commission salesperson and NOT and advisor. See "Get your Money Back video see http://youtu.be/KH6XMXlfdBw for a video which will explain further in three minutes, these concepts

Run if your "advisor" does not have the right license.......just about every commission salesperson in Canada and the USA is using misrepresentation to fool clients into a false belief of professional duties of care. see http://youtu.be/KH6XMXlfdBw for a video which will explain further in three minutes, these concepts
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Sat Nov 30, 2013 6:38 pm

Screen Shot 2013-11-30 at 6.34.40 PM.png


In a wide-ranging settlement with regulators Friday, the Canadian wealth management and retail division of Canaccord Genuity Group, one of the country’s largest independent investment dealers, acknowledged shortcomings in some of its most basic business practices over a number of years — including supervision of its branches.

“From 2005 through 2010 Canaccord failed to ensure that certain of its branch managers properly carried out their responsibility to supervise retail account activity,” the Investment Industry Regulatory Organization of Canada said in a document released after a hearing in Vancouver, where the firm is based.

“At the same time Canaccord’s head office… supervision of retail account activity failed to detect various instances of unsuitable holdings and excessive trading.”

Branch managers “failed to question” and head office practices “failed to detect or address… red flags indicative of suspicious or potentially manipulative trading related to clients” in Prince George and Vancouver, British Columbia, according to the “factual background” spelled out in the settlement that was approved by an IIROC panel.

Related
High-frequency trading activity in Canada appears to have declined: IIROC
The settlement covers additional supervisory failures in Montreal and Kelowna.

“The result of this dual failure [in branches and at head office] was that significant losses or activity that was potentially unfair to other market participants went undetected,” the settlement document says.



IIROC also pursued a separate issue concerning Canaccord’s refusal between 2009 and early 2011 to adopt procedures to ensure only qualified investors put their money in private placements.

Despite the widespread problems, Canaccord agreed to pay a “global penalty” of just over $1-million. This includes a $750,000 fine and a requirement to “disgorge” $310,000 in commissions. The firm will also pay $50,000 towards IIROC’s investigation costs.

The investment industry’s self-regulatory agency said there were mitigating factors, including that Canaccord has replaced its branch managers in Montreal, Kelowna and Prince George, as well as a number of registered representatives in those branches.

Some of the former Canaccord employees have been subject to separate enforcement cases brought by the regulator. In many cases, clients who sustained losses were compensated by Canaccord or by its former employees.

IIROC also noted that the firm has spent about $1-million implementing and maintaining a new electronic supervisory system.

“Today’s settlement is not a reflection on the current Canaccord Genuity,” said Scott Davidson, an executive vice-president at the firm. He added that chief executive Paul Reynolds took over as Canaccord’s key regulatory executive – also known as the ultimate designated person, or UDP — a couple of years ago.

“He’s ensured the firm has made great strides to address the issues raised by the regulator,” Mr. Davidson said.

Canaccord has undergone a business transformation in the past few years, pushing into new territories outside Canada such as Singapore through acquisitions, and adding to its size and scale in the United Kingdom and the United States.

The biggest acquisition was made in late 2011, shortly after chief operating office Mark Maybank left the firm. Canaccord purchased Collins Stewart Hawkpoint, an independent financial advisory firm with research, trading and wealth management operations.




http://business.financialpost.com/2013/ ... pervision/
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Mon Oct 28, 2013 6:30 am

Screen Shot 2013-10-28 at 7.25.42 AM.png



First place is a Cadillac, second place is a set of steak knives and third place is “you’re fired.”

Anyone who has seen the movie Glengarry Glen Ross will remember Alec Baldwin’s unconventional pep talk announcing a sales contest for a small-time real estate sales firm.

The sales culture of financial advisory firms isn’t quite so dramatic, but many people are still surprised to learn that the firms that employ their or their family’s adviser may have quotas, contests, and bonuses based on how much their advisers sell – not on how well they deliver good advice.

Quotas vary dramatically from firm to firm. Some full service brokerages expect each adviser to bring in $5-million to $10-million in new assets per year. Others require an adviser to bring in at least a few hundred thousand dollars in commissions every year. If advisers fail to make that quota, their payout – the percentage of the commissions they get to keep – can be cut in half. The cut, of course, is designed to encourage low performers to quit before they get fired.

From an investor’s perspective, these targets have one thing in common: None of them are aligned with the goals of putting you in the best possible investments or giving you a great financial plan.

Most of an adviser’s compensation is tied to commissions or trailer fees on mutual funds and other products, so an adviser has no direct incentive to deliver financial planning, which would include identifying insurance coverage you may be lacking, quarterbacking the creation of a plan for your estate, ensuring little Johnny has school paid for by the time he’s 18, or preventing your retirement diet from including dog food.

Quotas mean conflicts of interest. For example, a typical equity mutual fund might produce a 1 per cent annual commission to the firm, but a typical fixed income mutual fund might generate only a 0.5 per cent commission. An adviser struggling to meet a commission quota would need $2 in safer funds to generate the same revenue as $1 in a riskier fund.

This puts an adviser in the difficult position of choosing between what is in his interest and what is in his client’s interest. The risk profile of a portfolio should be determined by the needs of the investor, but the egregious imbalance of compensation skews some advisers toward building risker portfolios than are warranted. There is almost no incentive for an adviser to suggest that a client hold a portion of his or her portfolio in cash since that generates no commission.

To their credit, some financial advisers ignore the complicated formulas used to determine their take-home pay and focus simply on their clients’ needs. As long as they are not bottom-rung performers, this works out well for everyone.

But not all advisers are so focused on the client. You should be aware that the person sitting across the desk from you may be driven more by incentives and quotas than what your portfolio actually needs.

Is there a way to solve this problem? I hope that advisory firms come to recognize that providing comprehensive financial planning doesn’t have to be an overhead cost; it could actually be a competitive advantage that can increase revenue through referrals.

But for that to happen, consumers have to become more demanding. Too many people think a simple investment growth projection is a financial plan. It’s not. Unless your adviser has already given you a written statement that examines everything from your portfolio to your insurance needs to your retirement desires and estate planning, you should be looking around for one who can.

Preet Banerjee, a personal finance expert, is the host of Million Dollar Neighbourhood on The Oprah Winfrey Network. You can read his blog at WhereDoesAllMyMoneyGo.com and follow him on Twitter at @preetbanerjee.

http://www.theglobeandmail.com/globe-in ... um=twitter
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Tue Oct 15, 2013 9:58 pm

Screen Shot 2013-10-15 at 10.57.47 PM.png
Think trailers are the only payments to dealers/advisors by fundcos?
We see this in many Simplified Prospectuses:
“ We may pay your dealer up to 50% of their direct costs to publish and distribute sales communications. We may also pay up to 50% to lead seminars to educate investors on mutual funds, the funds or, pursuant to an exemption granted by the Canadian securities regulators, tax or estate plan planning matters. In addition to cooperative marketing ,we may also (a) organize and present educational conferences for advisors although the dealer decides who attends; (b) Pay advisors' registration fees for educational conferences organized and presented by others; (c) Pay industry organizations up to 10% of the direct costs of organizing and presenting educational conferences and (d) pay dealers up to 10% of the cost of educational conferences they sponsor for their advisors.” Potential conflict-of -interest ? - can't be [ wink wink, nod , nod].

thanks to Ken at http://www.Canadianfundwatch.com for this
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Thu Sep 19, 2013 8:05 am

Screen Shot 2013-09-19 at 9.05.28 AM.png
This is a good article which includes some research and mention of the salesperson trick of "advising" the DSC (deferred sales charge) mutual fund to maximize up front payments to themselves, and then after getting the biggest commission, then "advising" the client to switch to a different class of mutual fund down the road so that the salesperson can get a higher annually trailing commission.

It is industry regulator based research which supports my observation that most investment salespersons are preying on the vulnerability and reliance of their customers and not serving them professionally as is promised or implied.

Highlights:

CSA Discussion Paper 81-107, Mutual Fund Fees says, “This trend away from transaction-based sales commissions has resulted in advisors today being compensated largely through trailing commissions in connection with the distribution of mutual funds.” As a result, distribution costs are more hidden from consumers.

The automatic conversion of DSC funds to front-end load is described in 81-107 as a “conversion that yields a 100% increase in trailing commission compensation to the advisor without any consent from or disclosure to the client at the time of the conversion.”

Investors may not pay more, as the letter points out, but these arrangements “appear to display an alignment of interests between the mutual fund manufacturer and the advisor that could be detrimental to mutual fund investors,” says 81-107. Who is to blame for poor transparency? You and
me.

Read the full article here: http://www.advisor.ca/my-practice/what- ... ice-129019

Other insights of value to consumers to know:

ADVISOR’S FEE
Sadly, too many investors don’t know what they pay in fees. Investors put up 100% of the capital, take 100% of the risk and, as our calculations show, end up with less than 40% of their own money.
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Fri Aug 30, 2013 8:14 am

(Advocate comment......one of the slickest investment industry tricks to take advantage of clients, is to pretend that "highest commission" products do not offend the suitability guidelines. This allows commission salespersons to sell the highest cost product to clients, with the greatest commissions to themselves, lowest performance to customers, all the while pretending that this is not a customer "suitability" issue. Self regulation is de-criminalization:)

Screen Shot 2013-08-30 at 9.06.41 AM.png


http://www.moneymanagedproperly.com/new ... 20duty.pdf


Suitability, Minimum Standards & Fiduciary Duty In the Canadian Financial Services Market
The TAMRIS Report
Suitability, Minimum Standards &
Fiduciary Duty
In the Canadian Financial Services Industry January 2006
Total Asset Management Research & Investment Services 8 Algo Court, Willowdale, Ontario, Canada, M2M 3P1 Telephone; 416 730 8193 – E mail; Atamris@sympatico.ca

Contents
INTRODUCTION..............................................................................................................................................3
SUITABILITY ...................................................................................................................................................5
2.1 THE FIVE RULES...........................................................................................................................................5
2.2 RULE 1 – RELATIONSHIP WITH FINANCIAL NEEDS OVER TIME ......................................................................6
2.3 RULE 2 – RELATIONSHIP WITH ATTITUDES TO RISK AND PERFORMANCE PREFERENCES...............................7
2.4 RULE 3 – MUST RELATE TO ALL EXISTING INVESTMENTS ............................................................................7
2.5 RULE 4 – MUST RELATE TO CURRENT RISK/RETURN RELATIONSHIPS IN THE MARKET PLACE ......................8
2.6 RULES 5 – SUITABILITY AND EDUCATION....................................................................................................8
2.7 RESPONSIBILITY AND SUITABILITY IN THE TRANSACTION ENVIRONMENT ...................................................9
2.8 TWO TYPES OF TRANSACTION......................................................................................................................9
2.9 THE PREREQUISITES OF SUITABILITY .........................................................................................................10
2.10 SUITABILITY CONCLUSION ........................................................................................................................10
MINIMUM INDUSTRY STANDARDS ........................................................................................................11
3.1 “KNOW YOUR CLIENT” FORM ...................................................................................................................11
3.2 INVESTMENT KNOWLEDGE ........................................................................................................................11
3.3 RISK TOLERANCE ......................................................................................................................................11
3.4 TIME HORIZONS .........................................................................................................................................12
3.5 INVESTMENT OBJECTIVE............................................................................................................................12
3.6 INDIVIDUAL INCOME/HOUSEHOLD NET WORTH..........................................................................................12
3.7 WHY DO MINIMUM STANDARDS EXIST, WHAT ARE THEIR OBJECTIVES?.....................................................13
3.8 CONCLUSION KYC....................................................................................................................................13
RESPONSIBILITY & FIDUCIARY DUTY .................................................................................................14
4.1 HISTORICAL PRECEDENT FOR FIDUCIARY DUTY.........................................................................................14
4.2 TODAY’S ADVISORY RELATIONSHIPS.........................................................................................................15
4.3 ADVISORY V DISCRETIONARY, IS THERE A DIFFERENCE ............................................................................16
4.4 LEGAL DEFINITIONS OF FIDUCIARY DUTY ..................................................................................................17
4.5 REASSESSMENT OF FRAME V SMITH ..........................................................................................................18
4.6 SUITABILITY OF THE TRANSACTION WITHIN AN ADVISORY RELATIONSHIP ................................................18
4.7 WHEN A TRANSACTION IS NOT A FIDUCIARY RESPONSIBILITY ...................................................................19
4.8 TWO TYPES OF TRANSACTION....................................................................................................................20
4.9 LEGAL DECISIONS REGARDING SUITABILITY..............................................................................................20
4.10 FIDUCIARY RESPONSIBILITY MORE THAN JUST DISCRETION OVER THE TRANSACTION ...............................21
4.11 SHADES OF GREY .......................................................................................................................................21
4.12 CONCLUSION .............................................................................................................................................21
THE FUTURE OF FIDUCIARY RESPONSIBILITY.................................................................................23
5.1 HOW DO WE DEFINE THE “FIDUCIARY TYPE” RESPONSIBILITY ...................................................................23
5.2 PREREQUISITES OF FIDUCIARY RESPONSIBILITY ........................................................................................24
5.3 CONFLICTS OF INTEREST & HONESTY ........................................................................................................25
5.4 THE FUNDAMENTAL RIGHTS OF THE INDIVIDUAL INVESTOR ......................................................................26
EDUCATION & FIDUCIARY TYPE RESPONSIBILITY .........................................................................27 INVESTOR PROTECTION ...........................................................................................................................28 SUMMARY & CONCLUSION ......................................................................................................................29


see the full report at this link http://www.moneymanagedproperly.com/new ... 20duty.pdf
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Re: Tricks of the Trade. Sales tricks, investment abuses.

Postby admin » Sun Aug 11, 2013 1:45 pm

Screen Shot 2013-07-17 at 9.39.42 PM.png
For ten or twenty years now I have taken issue with the industry ability to lure customers with grand promises of trust and integrity, a guide to the investment jungle, so to speak, while getting away with being able to deliver a predatory gang bang, on the client for fees and or commissions about four out of five times. It has been quite shameful to watch, to blow the whistle on, and then greater shame to se the powers that be, all circle the wagons to protect the secrecy, the fees, and the customer gang bang.

Just recently a single document came out (from the Ontario Securities Commission) that highlighted just about the entire "lure and then gang bang" client abuse story in one place. It is a discussion document around the topic of whether or not to put in place a statutory (rules and regs) requirement that investment salespeople should put the best interests of their clients first. It is a good read and shows how people from both sides of the fence, argue for their respective positions.

I will paste the link to it near the end of this posting, and will also post highlights out of the document with some interesting bits highlighted in red. (my cynical observations are posted in a nice green:)

There is a lot of grist there for the mill and for anyone wishing to get their money back from industry bait and switch tactics. They are as rampant as any I have ever seen.
============================================================================================================================

http://www.osc.gov.on.ca/documents/en/S ... dtable.pdf

or

https://docs.google.com/file/d/0BzE_LMP ... sp=sharing



This is the unedited transcript of the Panel Discussion Re:
CSA Consultation Paper 33-403 - Statutory Best Interest Duty for Advisors
and Dealers on July 23, 2013 which we received directly from the
transcriber.
CANADIAN SECURITIES ADMINISTRATORS



From page 8,

retail clients believe that their advisors have an obligation to provide advice to them that is in their best interest.
Obviously, that's not what the current legal scheme
requires.

=============

There is a common law fiduciary duty
that currently can apply to the relationship between an advisor and their client based on the vulnerability of the client, the amount of discretion that is given to the advisor. But there is no statutory fiduciary duty; there is just the common law fiduciary duty. [color=#00BF00](catch me if you can....or “sue me” if you can)


(meaning there is not an “industry-legislated-requirement” (other than the one promised or heavily implied through industry advertising, brochures, websites) for “advisors” (or persons who call themselves “advisor”) to “act in good faith in the best interests of their client”.

It is a principle of law whereby if one says or implies that they are to be “trusted” as a “professional”, with rules, laws and expertise, then they should have to “act” that way.

However, the application of this “common law” requires an abused, often elderly, often vulnerable victim, to “catch me if you can” by entering into an unassisted, five, ten or fifteen year legal battle with what some refer to as “the strongest financial institutions in the world”.

It feels like adding another life trauma to the financial abuse, according to all who have had the misfortune of having to rely on this.)

The industry thus gets to play a “heads I win, tails you lose” game with its unwitting victims, much like a cat gets to when handed a mouse to play with. This is the height of abuse of market dominance by those “professionals” who are satisfied with this imbalance of power, and indicates that they may lack the professional or moral ability to meet the requirement that a dealer/advisor deal fairly, honestly and in good faith with their clients.

Sadly, the regulators, and all self regulators are 100% supported by salary money from the industry they purport to police, and thus the regulators turn a blind eye to financial victimization of the public, as a side effect of their job and salary loyalty.

It is as if the entire industry, regulators and all, are saying, “go ahead, sue me”. “We will knowingly abuse, cheat, shortchange and mislead our clients and the public until you do so.”

=======================too long===============



In addition, all investment dealer legislated requirements are written in “subjective” wording, which have little, none, or any of hundreds of various interpreted meanings, depending upon who is doing the interpreting. This leaves the client who is victimized, to be victimized a second, third, fourth time, by each denial of the abuse or victimization.


=================

“There are concerns that if you impose
such an obligation that is going to impose greater
costs on retail investors, and it may adversely affect their access to advisory services.”


(This is like saying, “if we cannot abuse our investment customers, then we will have to raise our costs to a level that prices honest services out of reach of consumers........”:)

(.....or “it costs us less to deliver abusive investments and investment advice to clients....and this we can pass this savings along (and pass along the abuse:) to our customers.......if we have to stop abusing our customers interests, then costs will have to increase because we do NOT anticipate accepting any conditions where we might make less money........) funny guys.....abuse of market dominance.....this screams

==================


I think everyone agrees there would be a requirement for securities
regulators to provide guidance as to exactly what
the standard is and what is expected in the
circumstances.



I do not agree. I personally feel that securities regulators, who may be paid in some cases as much as $700,000 by the securities industry itself, cannot be impartial or objective enough to be given this authority. They have clearly demonstrated a track record of not having the moral courage to separate their employment conflicts with their public interest protective mandate.

===========

page 12

I'm not talking about people who break the rules or rogue advisors or anything like that. I'm talking about what the rules are today and what people can do to be compliant with them. Under our current rules and the practice of conflict management under the suitability regime, advisors can accept commissions from third-party manufacturers. I suggest to you that if your doctor told you that he was receiving a commission
12
every time he recommended a certain pharmaceutical
product to you that you would have some qualms about the quality of the advice.

Connie Craddock. She is currently a member of the OSC's Investor Advisory Panel

==================
In Quebec, registered dealers and
advisors are subject to the duties of loyalty and care and must act in the client's best interests.

In other jurisdictions, the situation is not so clear.


but one thing, perhaps, that we can
all agree on here today is that the law is a mess.

What I mean by a "mess" is that there is a lack of
clarity about what the standard of conduct owed to the client is.


Anita Anand.
She is a professor of law at the University of Toronto,
former associate dean. She is the Academic Director of
the Centre for the Legal Profession, including its
programme on ethics in law and business, and she was
also the inaugural chair of the OSC's Investor Advisory
Panel.

page 20

=================================

clarification of the law is in order
page 21

=========

The U.K., the U.S., and the
EU, albeit with certain carve-outs and exceptions, have
21
seen fit to go forward and have done so.


==================

http://www.osc.gov.on.ca/documents/en/S ... dtable.pdf

===============

two
sides of the coin already that while the best-interest
investment is always a suitable one, a suitable
investment may not always be the best one.

70 percent of all investors believe
that their advisor has a legal duty to put the client's
best interests ahead of his or her own personal
interests. That's 7 out of 10 of these investors
believe that their advisors have to act in their best
interests. Yet, this is not the law.


page 22

part of the “bait and switch” misrepresentation game that makes salespeople and dealers sooooo rich

===============

page 27

the earliest reported broker liability case
in Canada comes from 1910. It's a case called Johnson v. Birkett. I'm going to quote from what the judge said in that case a hundred years ago: "A broker cannot take advantage of his position, and a broker has to act in perfectly good
faith after full disclosure."


(keep in mind that this is a principle in "common law", and NOT IN SECURITIES RULES OR REGULATIONS. The rules and regs are rigged, by regulators earning as high as $700,000 from industry payments. They are doing a grossly negligent job, in my opinion in the area of demonstrated public protection)
===========
==========

The current law, jumping ahead to the
2013 time range, imposes the highest duty designed to
give the most relief to people where there has been
a -- I'm quoting from Varco and Hodgkinson:
"There has been an act of betrayal,
disloyalty, a stench of dishonesty."

page 28

http://www.osc.gov.on.ca/documents/en/S ... dtable.pdf

============================

GMI Genetically Modified Investments (morally, ethically, ?)

do NOT have to be labeled
do not have to be in your best interests
CAN be the most expensive investment products, and most often are the products which make your dealer or broker the most money
Can be harmful to you


0ver 70% of investors are under a false impression that....customers must come first......see pdf from OSC link here.........and this is false and misleading

get your money back, link

=========================

page 34

why would I go
to an advisor that is not going to give me advice in my best interest?

Ermanno
Pascutto, FAIR Canada

http://www.osc.gov.on.ca/documents/en/S ... dtable.pdf


==============================

the average
consumer doesn't want to go hire a lawyer and spend
$100,000 that they don't have in order to get to that point

Ermanno
Pascutto, FAIR Canada

http://www.osc.gov.on.ca/documents/en/S ... dtable.pdf

page 36

(debate with lawyer who believes that it would be preferable to spend $100,000 to get this.........:)

====================

lawyer wants “common law provides judges the tools necessary to
determine on each case for each transaction what the
duty is going to be

page 37

sounds like shameless self interest and some wilfull blindness to cover the cognitave dissonace (of not being shamelessly selfish)
======================

page 38

The experience of most investors in
this country is not the experience that they acquire in
court. They can't get there, they can't afford it,
it's not worth it.


but the lawyers and industry players would like each and every investment abuse victim to have to go to court, and fight ten or more years to get justice:) :) (VERY funny:) VERY SELFISH minded.

================

We are
not talking about rogue advisors, we are not talking
about people who break the rules. We are talking about
whether the rules afford appropriate investor
protection. That's the job of securities commissions.

So I think we have to be really clear
here. You can be fully compliant with the rules as
they are today, and they don't afford adequate investor
protection.


page 39

shows that the rules in Canada are rigged specifically to allow customer interests to be avoided and abused......it is perfectly legal, perfectly acceptable to do so, and standard industry practice........because it makes another $25 billion each year to the mutual fund sales industry, and too bad if customers are cheated, misdirected, and shortchanged, out of their rightful retirements.........

============================

The Conduct and Practices Handbook
tells investment advisors when they take those two
courses that they have to take, that when disputes
between dealer members and clients are resolved through
civil litigation, the court will generally hold that
that investment advisor owes a fiduciary duty to the
client if the advisor provides advice and
recommendation and the client relies on that.


page 41 http://www.osc.gov.on.ca/documents/en/S ... dtable.pdf

=====================

andrew teasdale, page 43

A best-
interest standard should not be introduced for people
who are selling transactions, if you are looking at the
old definition of a broker. But I think what's
happened is we have transcended to an advisory -- an
advice review and we have gone beyond the transaction.
That's why you need to bring a best-interest standard
up from the courts onto a statutory basis.

================================

page 68

this is not about the good advisors, it's really
about regulation to deal with the bad advisors.
MS. CRADDOCK: No, I'm not saying that.
I'm saying the reverse. I've been saying it's not
about bad advisors; it's about rules.


(currently the rules (the ones followed by investment regulators, not courts) allow investment sellers to violate and abuse the interests and the rightful returns of investment clients, without their knowledge or consent. In fact, investment sellers are allowed to strongly and constantly imply quite the opposite. They are allowed in todays rules to advertise and repeatedly imply that they are there to “protect and help to guide” vulnerable customers, and then allowed to do exactly the opposite.......... robbing canadians (including pension funds, charities, governments, and retirements) of tens of billions of dollars each and every year.

All to foster greater riches for the strongest financial institutions in the world......it is like reliving the lies, the power and the manipulations of the tobacco industry of the 1960’s, except this time it is the financial health of citizens and governments which is being intentionally harmed for money.......


====================

solution: if you honestly refer or call yourself a salesperson, then you should be able to be a salesperson.........if you (honestly or otherwise) refer to yourself as an investment “advisor” then you owe a duty of care to behave and act accordingly, without the need to spend ten years in court to “catch them if your can”.


--=================

read it here yourself

http://www.osc.gov.on.ca/documents/en/S ... dtable.pdf


The investment industry now does not have to take responsibility for giving you false, bad, selfish or misleading “advice”. simple

================================

If you said to a client, "Look, do you
think currently that your advisor owes you a
best-interest fiduciary standard," they would say,
"Yes, of course they do." If you asked them, "Does
that mean to you that the broker should not take
advantage of his position and act in a perfectly good
faith manner after full disclosure in the
95
circumstances," I'm sure all of those clients would
say, "That's exactly what I mean."

That's a quote from 1910. It's been
going on and been applied in various circumstances, and
taking into consideration the nuances for going on 103
years now, it's a good system that we have got. It
does protect investors.

more bullshit from page 96 about how the courts can figure it out


================

ermannno replies

For the average person who loses
$25,000, $50,000 or $100,000, the system does not serve
them at all. Experienced securities lawyers won't take
on their cases. If they're able to get a case taken
on, maybe they may settle it for 50 cents on the
dollars. Maybe after they pay their lawyers they end
up with 20 cents on the dollar.
The system doesn't work for the average
consumer.

=========================

summary “catch me if you can.......I can give you shitty advice and shitty products all day long”.....I am the financial industry.......sue me!

===========

then, IF a Canadian financial abuse victim is able to take on one of the strongest financial institutions in the world, they will be dragged through ten years of the glorious Canadian legal system, with several hundred thousand dollars of costs........expert witnesses will be brought into court by the financial institution and they will be handsomely paid to tell the courts anything the financial institution needs told in order to beat the client again..........if the client is fortunate enough to find one of the half dozen or less experts who are not tied to a financial industry salary or loyalty, they the courts will be told that those persons are not “experts” but “advocates” for abused investors and they will try to have them disqualified, while not admitting the “advocate” nature of their own paid experts.

Also, despite all the commentary in the expert panel discussion above, about their now being a “common law fiduciary standard”, each case I have seen, shows the financial institution arguing strenuously against any such animal, saying the plaintiff was the “author of his or her own misfortune”, and doing everything possible to evade any and all responsibility, or duty of care.

For example, in the case of octogenarian Norah Cosgrove, RBC’s statement of defense was that Mrs. Cosgrove never gave “discretionary” powers over to RBC and thus they did not owe her any fiduciary duty.


I find that the lawyers, regulators and investment dealers who claim that customers already have a legal recourse, or any access to a fiduciary duty, are being disingenuous at best, and willfully dishonest at worst. To give such a comment is akin to saying the christians had a ‘fair chance” when thrown to the lions..................I have seen no financial institution to date that will allow such “fairness” into the equation. I have seen nothing but abuse of market dominance, followed by abuse of legal dominance, to totally unbalance the playing field against the public.

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