You’ve likely seen those Questrade TV commercials. They shine a light on the high fees that Canadians pay for their investments . The campaign shows several break up scenarios where investors are saying goodbye to their advisor and the accompanying high fees.
It was nice to see this article and headline in the Globe and Mail.
The ads are powerful and hard-hitting because they are laser focused on the truth. In the land of advertising and communication there is nothing more powerful and more persuasive than The Truth. When I was teaching young creatives at an advertising agency or at a College I would suggest they start with the truth when searching for ad concepts or campaigns. We can then move on to exaggerate the truth and then to other more fantastic concepts in the hope to surprise viewers or readers or listeners.
But in the land of investing no exaggeration is required. Canadians pay the highest mutual fund fees in the developed world. The unfortunate truth is surprising enough. The campaign is very successful. While the truth hurts, it also resonates with many Canadians.
Real advisors, good advisors will not diss these ads.
Brenda Bouw, the author of the Globe and Mail piece looks at these ads from the perspective of the advisor, and potentially those high fee advisors who might be losing clients.
The ads present some trying scenarios for advisors, and as the article suggests the advisors better have an answer. In fact they need a very good answer that will include the recognition of the fees that they are charging and the value that they are delivering. And advisors should recognize the truths in the ads and the fact that Canadians typically do pay high fees and many do not get value for that service.
An advisor that is delivering value will not be intimidated by the Questrade ads . They will see it as an opportunity to have an open and honest conversation. It will be an opportunity to demonstrate that value. From the article …
“The ads are forcing advisors to look at their business models and ask, ‘Am I demonstrating value for these fees?’” says Simon Tanner, principal financial advisor with the Dynamic Planning Partners team at Investia Financial Services Inc. in Vancouver. “If you’re only showing your client that you’re spending 10 minutes a year with them, you’re probably not worth it. Or, if business-wise, it only makes sense to spend 10 minutes a year with [these clients], then they likely aren’t a fit for your practice. Advisors should be able to say that.”
And Ron Fox, CEO of Glidepath Portfolio Services adds …
“The Questrade ads have been somewhat controversial to some advisors who actually have been jolted out of complacency,” says Mr. Fox. “Advisors who display the kind of complacency and arrogant self-focused behaviour displayed in these ads do not deserve their clients. … They have simply dropped the ball on their service and have let their clients down.”
John DeGoey, the author of Stand Up To The Financial Services Industry offers on the Findependence Hub.
Right from the get-go, De Goey is pretty harsh on many members of his profession. Much of what advisors believe is “demonstrably wrong” he declares right on page 2 of his introduction: “People who give advice for a living routinely give bad advice while honestly believing that the advice they are giving is, in fact, good. That’s a huge problem.”
He puts much of the blame on the managers of retail advisors, chiefly the senior members of Canadian mutual fund companies.
There are good advisors and ‘bad’ advisors.
But we certainly should not discount the value of great advice. It can be worth every penny. But again, we need to distinguish between getting advice and getting mutual fund products from a salesperson.
Ask the tough questions
From advice-only Money Coaches Canada here’s Questions to Ask Your Financial Advisor. It’s your money. No one should care more. Are you paying high fees? Are you getting value for the cost of your advice? Find out, please.
If it becomes obvious that it’s time to move your investments to a better place there are many wonderful and simple solutions.
You might move to a Canadian Robo Advisor. And certainly that includes the Questwealth offering from Questrade. They offer the lowest management fees for a Canadian Robo at .20% and .25%. Nest Wealth offers a Netflix-like monthly subscription fee that will range from $20 to $80 per month. Keep in mind that investors will also pay the fees for the ETFs plus trading costs at certain discount brokerages. With our friends at Questrade most ETF purchases are free.
More robust advice and planning is available at Robo’s such as WealthBar, ModernAdvisor and Justwealth.
You might seek out an advice-only planner
An advice-only planner is not tied to any investment products so you will receive conflict-free advice. You can access a holistic financial plan and pay only for that plan. For many the shortcoming will be that advice-only means that you will not receive a recommendation for the actual investment products. That said and back to Glidepath Portfolios, that’s where they come in. They work with your advisor and will put the investment plan into play. They’ll recommend and manage the investments for a fee of .50%. They use ETF portfolios to keep investment fees low. You as the investor will pay those MERs that are embedded within the ETFs.
You might gain the knowledge and confidence to self direct your own stock or ETF Portfolio. Here’s a story on a friend and reader who left the land of high fees and poor advice (and some terrible mistreatment) to move to a simple One Ticket Portfolio.
On the education front you might have a read of this how-to self-direct book with links to many tools and courses. Here’s my review of The Value of Simple. In that post, you’ll also find some options on the advice-only front.
You might not need advice
Let’s face it, do you really need expensive advice if you are struggling to fill your RRSP and TFSA space? You might be able to flourish with ‘advice light’ or no advice. You simply need sensible, low cost well-diversified portfolios. That said, mistakes can be made even by those of modest means. Please be careful and have a read of The 3 Most Common Mistakes of Canadian Investors.
If you’re in the accumulation stage without a workplace pension to consider things might be straight forward. Of course discover how much you need to invest to reach your goals. Know your tolerance for risk. Do you have insurance? Emergency fund? You’ve cleared your high interest debt?
You might just need to keep it simple and cheap. I am happy to help if you have any questions on that front. Send me a note or leave a message on this post.
Thanks for reading.