My friend was telling me about his Financial Advisors

[Cut-Throat]

I was visiting a friend the other day and he started asking me about finances, investing etc. - I basically told him that I invest in index funds in different asset classes.

He then went on to describe the 'outfit' that was handling his finances. He said they were different and had been educated at Harvard and were 'way out in front' of the run-of-the-mill brokers. They used a 'scientific approach' to pick the correct investment mix that would give you superior returns. It was truly cutting-edge and not like anything ever used in this industry and that he was very lucky to have run into these guys. :

I asked him how much they charge for this service. A blank stare came over his face. I knew he had no idea. But I could tell, they really made him feel special and that they convinced him that they were 'different' from all the crooks. He was now trying to convince me, but he could tell that I was not that interested.

I just smiled and said 'good for you'. :

 

[JustCurious]

It sounds like your friend is really lucky that he ran into such smart people that have been able to figure out how to make more money in the market than the rest of the investing world. :

 

[My Dream]

Well I'll tell ya, I was like you're friend in that I had no idea what they were charging since I was told that if I stayed with them for 6 years there was no fee. I was mislead.

 

[azanon]

Well I'll tell ya, I was like you're friend in that I had no idea what they were charging since I was told that if I stayed with them for 6 years there was no fee. I was mislead.

One of the truths i live by is: Everyone's out to get everyone else's money. Exceptions are VERY rare. Just pay attention one day and count how many times this truth is validated everywhere you look.

 

[kcowan]

I have had conversations with many of my friends and relatives. They have no idea that there are better and cheaper ways to invest their money. They really want the problem of investing to go away because they are busy with other things.

 

[mickeyd]

But I could tell, they really made him feel special and that they convinced him that they were 'different' from all the crooks. He was now trying to convince me, but he could tell that I was not that interested.

So C-T, What is your long-term plan to convert him into a passive investor? You're not going to just let him lay down and allow them to continue to operate on his wallet are you?

You said he was a "friend" so maybe he is not in the "good friend" catagory yet. If he makes it to "gf" catagory, I'd give it another try. Seems like a good long-term project for you.

 

[My Dream]

I have been with IG in Canada for 9.5 years of which I invested on a regular basis for 6.5 of those years. For the first 5 years, my principal amount had increased a total of around 1% over the course of all those years. I had gotten so busy at work that I wasn't even able to meet with my adviser more than about twice a year, and when I questioned him, I always got the same answer, " you haven't lost any money since you haven't cashed in" and the famous, " now that the market is down, this is a good time to invest". How stupid was I? Meanwhile I never realized that my neighbor across the street was doing his own investing and was averaging approximately, 4% each year during those years. When I finally woke up and smelled the coffee, I told my adviser that this neighbor was getting more than I was from IG, and I proved it by showing him what he invested it, his reply was that if he could get me those funds would I invest more with IG, I laughed and said, are you kidding.

 

[Rich_by_the_Bay]

One of the truths i live by is: Everyone's out to get everyone else's money. Exceptions are VERY rare. Just pay attention one day and count how many times this truth is validated everywhere you look.

I must admit I agree with you. I am philosophical about it and usually don't take it personally, thought it's easy to get cynical.

I figure that in a capitalist society like ours, there has to be some barometer or standard of success and worth. In this case it's money. Not a dirty word, and not inherently a bad thing.

Like I say to my wife and kids (when they'll listen) concerning the commercial world: if something doesn't make sense, it's probably about the money.

 

[sgeeeee]

. . . if something doesn't make sense, it's probably about the money.

or power. . . Those two things are often highly correlated, but not completely.

 

[justin]

I usually buy power with my money. Doesn't everyone (except Nords)?

 

[sgeeeee]

I usually buy power with my money. Doesn't everyone (except Nords)?

I'll bet that you use your power to make money too. It's a vicious cycle.

 

[73ss454]

Up till 2 or 3 years ago I also had no clue about anything with regards to investing.

When I hear people talk about investing and I ask them what expense ratio and commissions they're paying I also get that same blank stare.

No wonder the investment house's are having blow out years, there's a lot of dummies out there. Sorry to say I was one of them.

 

[Cut-Throat]

So C-T, What is your long-term plan to convert him into a passive investor? You're not going to just let him lay down and allow them to continue to operate on his wallet are you?

You said he was a "friend" so maybe he is not in the "good friend" catagory yet. If he makes it to "gf" catagory, I'd give it another try. Seems like a good long-term project for you.

At this point, he is so excited about this 'investing opportunity', that it would be easier for me to convert JG into a Liberal Democrat.

 

[bosco]

I have been with IG in Canada for 9.5 years of which I invested on a regular basis for 6.5 of those years. For the first 5 years, my principal amount had increased a total of around 1% over the course of all those years. I had gotten so busy at work that I wasn't even able to meet with my adviser more than about twice a year, and when I questioned him, I always got the same answer, " you haven't lost any money since you haven't cashed in" and the famous, " now that the market is down, this is a good time to invest". How stupid was I? Meanwhile I never realized that my neighbor across the street was doing his own investing and was averaging approximately, 4% each year during those years. When I finally woke up and smelled the coffee, I told my adviser that this neighbor was getting more than I was from IG, and I proved it by showing him what he invested it, his reply was that if he could get me those funds would I invest more with IG, I laughed and said, are you kidding.

my wife has her RRSPs with IG. I was looking at the expense ratios on their funds and couldn't believe it--what larceny!

I met with her advisor, who told me they "don't believe in index funds."

I've finally convinced my wife we need to move that money to a discount broker. Now I need to do some research. All my tax-deferred money is in the states so I'm not completely familiar with the Canadian investing universe. Although the financial webring looks like a good resource.

As I understand it, US mutual funds are off-limits in RRSP accounts, but ETFs are ok. Also, I seem to remember the rescinded most or all of the requirements against foreign funds?

 

[Mr._johngalt]

I must admit I agree with you. I am philosophical about it and usually don't take it personally, thought it's easy to get cynical.

I figure that in a capitalist society like ours, there has to be some barometer or standard of success and worth. In this case it's money. Not a dirty word, and not inherently a bad thing.

Like I say to my wife and kids (when they'll listen) concerning the commercial world: if something doesn't make sense, it's probably about the money.

I express this as "Everyone's trying to get in my knickers!"

JG

 

[jazz4cash]

I just smiled and said 'good for you'. :

I understand not wanting to attempt to convert a true believer, but dontcha think you should at least tell them something like "make sure you understand how much you are being charged for this wonderful service"?

.........and cant you share the name of this fabulous investment company with us? I would be very surprised if sombody around this forum doesn't know how they work.

 

[My Dream]

Up till 2 or 3 years ago I also had no clue about anything with regards to investing.

When I hear people talk about investing and I ask them what expense ratio and commissions they're paying I also get that same blank stare.

No wonder the investment house's are having blow out years, there's a lot of dummies out there. Sorry to say I was one of them.

If I may ask, what is expense ratio, and how is is calculated? 2nd question, why would IG charge both commisions and expense ratio, and don't say, cause they can?

 

[ladelfina]

1.) http://www.investopedia.com/terms/e/expenseratio.asp
2.)

 

[bbuzzard]

If I may ask, what is expense ratio, and how is is calculated? 2nd question, why would IG charge both commissions and expense ratio, and don't say, cause they can?

Expense ratio is the cost of managing a portfolio relative to the amount invested. Commissions are the fees for investing in the first place.

Thus, say you want to invest a cool $100,000 in the Buzzard High Risk Fund. I charge 5% commission for the privilege of investing in my fine fund (because I can), so I pocket $5,000 of your cash, and $95,000 is invested in my fine product. Then, because of my investment skills (which chicks dig and you don't have, only I do), I then charge 2% expense ratio. I also hide an additional 2% of expenses in trading cost that I do not tell you about (I churn the account and own, as a separate entity, the broker I use for trading). Thus, for the first year, I then pocket an additional $3,600 of your hard earned dollars. I take 4% each of the subsequent years also.

Now, if you were a fool, you would invest in a Vanguard Index Fund, which charges no commission and about 0.25% expense ratio. Thus, you would have $100,000 invested, and would pay $250/year to run it. However, this does not have the cachet of the Buzzard High Risk Fund, now does it?

[edit spelling]

 

[My Dream]

1.) http://www.investopedia.com/terms/e/expenseratio.asp
2.)

Thanks ladelfina, you wanna know something, I had to read that definition about 3 times and each time I started to understand it more and more. For eg. I came across the word porfolio manager and thought what or who is that, I know you're probably thinking..... a person that manages a porfolio.............daaaaaaaah! Boy is this a learning process, I'd rather rebuild an engine.

 

[Sheryl]

Up till 2 or 3 years ago I also had no clue about anything with regards to investing.

When I hear people talk about investing and I ask them what expense ratio and commissions they're paying I also get that same blank stare.

No wonder the investment house's are having blow out years, there's a lot of dummies out there. Sorry to say I was one of them.

Sounds like me!

When I think of all the times my dad tried to interest me in investing and I just shrugged him off, I have to laugh. Now I've taught him a few things -like how to use the internet to buy bonds. I've created a monster!

He'll die a happy man now that he knows I understand the yield curve.

 

[ktupper]

If I may ask, what is expense ratio, and how is is calculated? 2nd question, why would IG charge both commisions and expense ratio, and don't say, cause they can?

Along with Investopedia, Motley Fool has good info on it.

http://www.fool.com/school/mutualfunds/costs/ratios.htm

 

[Nords]

He'll die a happy man now that he knows I understand the yield curve.

Just what every parent wants for their kids...

 

[mickeyd]

Buzzard High Risk Fund

Buzzard, you big dummy, why are you not charging at least 20 basis points in 12b-1 fees? How can you expect to be honored by your fellow fund managers if you do not know how to properly fleece charge the appropriate fees for your superb services?

 

[FIRE'd@51]

He then went on to describe the 'outfit' that was handling his finances. He said they were different and had been educated at Harvard and were 'way out in front' of the run-of-the-mill brokers. They used a 'scientific approach' to pick the correct investment mix that would give you superior returns. It was truly cutting-edge and not like anything ever used in this industry and that he was very lucky to have run into these guys. :

I asked him how much they charge for this service.

Did you ask him if he had any idea of the investment strategy they were using?