It sure didn't take long for the inadequacies of the current investor protection system to be displayed in cruel fashion after our last post contrasting the arguments of the financial advisor group Advocis with investor gadfly (and I mean that admiringly) Ken Kivenko. Advocis thinks everything is just fine with the system today.
The impartial Ombudsman for Banking Services and Investments investigated the case of the Irons (who have allowed themselves to be identified on this CBC news video), an elderly couple whose financial "advisor" put their money into dubious high-risk investments when their true risk tolerance was clearly low. Inevitably the investments went bad and the couple lost a lot of money they could not afford to lose. The OBSI found the mutual fund company the "advisor" worked for to be negligent and ordered the company to pay compensation. The company W.H. Stuart and Associates has stepped forward, looked the regulator and the victims in the face, and told everyone to shove off, it's not paying.
Meanwhile, on its website it continues to spin its line "W. H. Stuart & Associates
is a family owned independent Mutual Fund Dealer & Insurance Agency
committed to providing you, the Canadian investor, regardless of your
investment amount, with the knowledge to make the right financial
investment and retirement decisions to achieve security and peace of
mind". Of course, those nit pickers amongst us might note that the sentence does not actually specify whose security and peace of mind the decisions aim to achieve. It could be yours or theirs!
Elsewhere the Stuart website says "We wanted
to build a company where the education of
clients about financial matters came first
and foremost". In a cruelly ironic way, the Irons have received quite an education. In this month where financial literacy is being promoted as the solution for Canadians maybe there's a lesson from the Irons' experience. Should we be expecting people to acquire engineering literacy to know if the new car they are buying is safe to drive, or medical literacy to decide whether their doctor is giving good treatment advice? (Though it is a bit of a stretch to say that the Irons should not have had the common sense to question why their "guaranteed like a GIC" ill-fated investment would pay them 20% at a time when interest rates were only around 5%) Till fiduciary duty comes into play, the only financial literacy that matters is the ability to figure out who you can trust and who knows what they're doing.
I guess the industry knows that unfortunately, as watchdogs go, the OBSI can only bark and recommend compensation but not bite and order it.
Meanwhile, there is silence from the Mutual Fund Dealers Association of Canada, which Stuart identifies as its strategic partner and which bills itself as having "... a mandate to enhance investor protection and strengthen public
confidence in the Canadian mutual fund industry".
In this case, there is also silence from Advocis but we cannot blame them since it seems none of the people nor the firm itself are members of Advocis.
Monday, 26 November 2012
Posted by CanadianInvestor at 11:23
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