Beat the Bank: Real Investor Stories and Lessons Learned

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Beat the Bank: Real Investor Stories and Lessons Learned

Welcome new subscribers and Happy New Year to all!

This is the first of a three email series in which your fellow Beat the Bank readers describe, in their own words, their personal experiences in switching to smarter investing and share valuable lessons they learned along the way. Today's email focuses on real investor experiences with former advisors. Next week's email will describe experiences with account transfers and overall level of satisfaction after making a change. The third email will offer investor "pluses & minuses" of making the switch and valuable tips for those considering doing the same.

First, my sincere thanks to those who shared their personal stories. The response was fantastic…. more than 10,000 words worth. Learning about your experiences will encourage many others to Beat the Bank! (In cases where several readers made similar points, the comments have been distilled to capture the main message.)

I believe the following summary is very instructive but it is not a scientific survey. Also, while every investor can benefit from learning the basics, switching to lower cost investing is not necessarily right for everyone. You ultimately have to decide what is best for yourself.

Some readers switched to lower cost investing several years ago while others are just now making the move. Several commented they wish they had done so many years ago but, as one investor noted, low cost options have only become widely available over the past several years. Given the fear of the unknown, other investors hesitated for years.

Most investors switched to "Do-It-Yourself" (DIY), "Assemble-It-Yourself" (AIY) or "Robo" investing while some found lower cost advisors or lower cost mutual fund providers. Some investors did quite a bit of research before selecting their new investment firm while others switched to a brand name they knew (for example, to their own bank's online service). A couple of readers who tried DIY found it to be too much.

Some supplemented DIY/AIY/Robo investing by working with a "fee-for-service" advisor to develop a long term financial/retirement plan.

Experiences with Former Advisors

Some readers had very positive experiences with advisors but eventually moved on because high costs could not be lowered:

"Our mutual fund adviser was somewhat disappointed, but understood and was helpful with the paperwork."

"I pulled my money out of mutuals at the big bank and informed my 'guy' that he could help me move funds over to ETFs at the same bank or I'd take my money elsewhere. He helped me move the money."
"No issue with the advisor when I made the switch. I believe they were expecting that it would happen one day, friendly discussion."

"Fortunately, my "advisor" at the bank retired (she was a lovely lady but in hindsight, not an advisor) so it was easy to make the switch." 

"I really didn't have a lot of money saved, and my financial advisor for my group retirement plan at work talked me into putting that money into a mutual fund through him. After reading your book I realized very quickly how badly my investment was actually doing. Not only were the fees extremely high (2.5% MER) but the asset allocation was not what I needed. Once I was comfortable with the idea of DIY investing, I requested all my funds be transferred over to an online broker. He told me he appreciated me being up front that I was moving my money, and it was a good thing to take control of my own investments."

Other readers expressed a variety of frustrations with former advisors:

"For many years I had a bank advisor. They never called me to review or anything. I finally sat down one day, looked at my investments and said I am sure I can do better."

"Several advisors tried to sell me complex, confusing products with no clarity on costs and recommended tax inefficient premium priced bonds and volatile preferred shares." (See Beat the Bank page 187)."

"After my advisor quit, I was transferred to the next advisor, who, among other things invested me into some mutual funds with deferred sales charges, without informing me. Shortly after he quit also."

"I turned to page 47 in your book and wrote my advisor a letter outlining the paragraph you said to write. My costs averaged 2.04% and I knew then and there I had to try and find a way to invest that would be more profitable for me. My advisor was not too pleased with me wanting to move my money especially when I showed him my T-Rex Score, and that was it."

"My advisor recommended leveraging when I first hooked up with her, to the tune of $200k.  I didn't realize until last year that those funds had been mostly sitting in money market funds, earning essentially no returns, with MER's >2%, and I was paying interest of prime on one 100k loan, and prime +1% for the other 100k!"

"A new advisor recommended we purchase his recommended new RRIF investments along with cashing in my wife's company retirement pension accumulation to invest in a LRIF. We later discovered 80% were DSC Mutual Funds with fat up front commissions. Eighteen months later the advisor sold his book of clients to another advisor who recommended we sell most of our funds. When we complained to the manager, we were told to take our business elsewhere."
"I used to be with a full service advisor at a bank dealer. He would tell me about amazing new investments (principal protected notes, for example). I never understood what they were, but I trusted him. Why? Because I am a Canadian, who, like your sister, trusts banks unconditionally until they are told by people like you, that banks have their own interests in mind, not mine or yours, when they give me/you advice."
"I got sucked into the mutual fund approach at a big bank, and pretty much watched my money do nothing."
"We had followed our advisor's advice and invested $75,000 of borrowed money against our property's value toward unregistered investments.  These funds would be sold and transferred many times over the years with us always needing to pay income tax on capital gains.  In the summer of 2019, I had called our advisor to sell these funds because I felt that it was too risky.  He talked me out of it because unfortunately I wasn't confident enough at the time to argue my case.  It was our money after all.  To say it was uncomfortable is an understatement.  I handled it by simply transferring the funds in to my new online account and then cashing them out.  I didn't have to deal with him again." 

"We wanted to see more growth from the RRSP funds. Our advisor suggested a higher risk portfolio of 100% stocks; however clients had to have $100k or more to join "The Plan."  The Plan was an actively traded group of diversified stocks with some high growth names.  My husband bought in and didn't pay much attention to the fee structure. My husband's account saw some nice gains, but of course stocks don't always go up.  I got looking at the statements and couldn't believe the fees - no matter whether there were gains or losses - in the 3.5% range.  And of course, the more one's balance grew, the more the fees were. We requested a meeting with our advisor and when I showed him the math of what we had paid in fees, he told me they didn't think about accounts in terms of fees.  We should focus on the growth, the quick action of the fund managers to get out of stocks that weren't meeting their expectations and the managers' expertise.  It amounted to smoke and mirrors."
Some additional observations:
"I did feel bad about leaving my bank advisor as he's a great guy. He wasn't sold about lowering fees and said "you get what you pay for". He hadn't heard of your book."

"For now, I am stuck with mutual funds because my employer's group RRSP has no other options. But I plan to apply additional savings to AIY/DIY."

"When asked why I was moving my money, I replied "It's business, not personal" and kept it at that."

"I notified my advisor with a detailed email a few weeks before I started the process, to give him a chance to engage a discussion, pros and cons, deal with my concerns. But that didn't happen. He just went silent and I've never heard from him since."

"Following the transfer, I got a phone call from my financial advisor and his boss whose compensation was hit. I found that reassuring."
Note: I believe the great majority of advisors are good people and some do a great job for their clients. But far too many are stuck in a sales culture built on high-cost products.

As mentioned, next Sunday's email will describe experiences with account transfers and overall level of satisfaction after making a change. The following Sunday's email will offer investor "pluses & minuses" of making the switch and valuable tips for those considering doing the same.

Once again, many, many thanks to all of you who took the time to share your stories!

If you have questions or comments just reply to this email. Wishing you all the best in 2022!

Investment Advice for Affluent Canadians
Some investors prefer ongoing advice. I offer full-service, ongoing investment advice and financial planning for clients with portfolios of $1 million+. My clients benefit from greatly reduced fees and portfolios which are tailored to match their personal objectives, time frame and risk tolerance. If my service might be of interest to you, just reply to this email and we can set up a call to discuss.

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