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A report prepared for the Consumers Council of Canada for presentation to the Office of Consumer Affairs Industry Canada
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General: OSC Investor Advisory Panel
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An in-depth analysis by Dr. P. Reeve.
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Posted by root on Thursday, September 02 @ 00:00:00 EDT (0 reads)
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Canadian retail investors are exposed to financial markets that are among the most developed yet poorly regulated in the world. They enjoy an overwhelming supply of products and services to address their financial and investment needs. Advice is a component of this unduly complex marketplace. Canadians historically have chosen to invest and manage their financial decisions with the help of advisors. But things are changing . According to J. D. Power and Associates, one third of full service brokerage clients also do some investing online, and 26% of bank mutual fund investors are also using the online channel.
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The core challenge is to what extent the industry is prepared to take hold of the matters
that require regulation and to operate a self-regulatory system that will deal effectively and
efficiently with the issues raised in this report and that will result in fair and equitable
treatment of investors.
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General: Are Index Funds Worth a Second Look?
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With
all the media hype over exchange-traded funds (ETF's) , the lonely
Index fund provides a acceptable vehicle for index investing. Index
funds are sold mainly by the big banks, and they offer exposure to a
wide variety of stock and bond indexes. The key distinguishing
feature is fees. Because management fees and sales commissions are
relatively low, fund companies and dealer representatives don't
promote them. Index funds have some features that make them
attractive to some investors. The ability to make small dollar
investments and easily reinvest distributions is a plus. Some
investors shudder at opening a brokerage account to buy ETF's - they
find it easier and less intimidating to hold a mutual fund account.
Additionally, some sort of advice, albeit conflicted , comes with
owning an Index mutual fund.
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General: Socially Repsonsible Investing -- Myths and Reality
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Socially responsible investing (SRI), also known as socially-conscious or ethical investing, describes an investment strategy which seeks to achieve both financial return and social good.
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General: Mutual Fund Investors: Sharp Enough?
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Who are mutual fund investors? The answer is critical to regulatory policy. The mutual fund industry portrays fund investors as diligent, fairly sophisticated, and guided by professional financial advisors. The SEC paints a more cautious portrait of fund investors, though touts improved disclosure by the fund industry as a sufficient antidote. However, an extensive academic literature finds that fund investors are unaware of the basics of their funds, pay insufficient attention to fund costs, and chase past performance despite little evidence that high past fund returns predict future returns. These findings suggest that policymakers should rethink current regulatory policy. Disclosure may not be enough.
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Communication is important, especially at the outset of the relationship. The best thing people can do to protect themselves is make sure your objectives are clear in your own mind and clearly communicated to your advisor or broker. This will help avoid problems and complaints downstream.
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When you open an account with an investment dealer you have to provide personal details like your income, net worth, risk tolerance etc. This information, periodically updated, supports Know Your Client (KYC) rules that securities regulators have put in place. The theory holds that the more an adviser knows about a client ,the better he can serve them. The recommendations he makes must be “suitable” based on the KYC.
There is however no equivalent form for an investor to Know Your Advisor-KYA . Not knowing your advisor can lead to unsuitable investments, higher costs, loss of capital and even “misappropriation of assets” as regulators refer to theft. So, here`s a form you can use to keep track of your advisor
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General: Opening an Online Brokerage Account? Points to Consider
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On-line
accounts
are growing at a fast pace.Whether
its investment dealer shenanigans, incompetent advisers, high mutual
fund fees,/ trading commissions, the non-bank ABCP fiasco, poor fund
performance , the Earl Jones Ponzi debacle, or advisor fraud, retail
investors are looking at alternatives to the commission-driven
advisor channel.
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Posted by root on Saturday, March 20 @ 00:00:00 EDT (542 reads)
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All you have to do is enter the gross return of the fund (referred to as the Market Return which could be misunderstood as the benchmark index return), the annual fee, any applicable loads and the number of years.
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For any number of reasons there is an increased interest in Do-it-yourself investing (DIY) .Whether its investment dealer shenanigans, greedy commission- driven advisers, high mutual fund fees, the non-bank ABCP meltdown, the Earl Jones fiasco, poor fund performance or advisor fraud, retail investors are looking at alternatives to the commission-driven advisor channel...
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Legal: Markarian v. CIBC World Markets Inc.
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Markarian v. CIBC World Markets Inc.
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Posted by root on Saturday, September 12 @ 00:00:00 EDT (0 reads)
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SIPA Public Forum - Markham - 6 June, 1999 , STREETPROOFING FOR INVESTORS :STRATEGIES FOR MOVING BEYOND HOPE, GREED AND FEAR by Glorianne Stromberg
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While mutual funds help reduce issuer –specific risk through diversification, they introduce a plethora of new threats to satisfactory returns that are inherent in their legal / tax structure, fees/commissions and industry sales practices. These threats are not articulated in the fund prospectus. Subtle hazards specific to the fund include “soft “ dollars (brokerage business given to brokers in exchange for research but sometimes for other goodies-there’s a reason the word soft is used), and the hazards of style drift (consciously deviating from the fund’s stated investment policies, risk profile and objectives to boost returns).
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Over 10 million Canadians make investments in stocks, bonds, GIC’s and mutual funds. It’s a BIG business and highly profitable for the banks, fund companies, dealers and brokers. Mutual funds alone collect over $10 billion in fees each year. -the sales are commission based and include embedded sales commissions. When financially unsophisticated investors meet commission or quota- driven advisers, a toxic mixture can be created. So, it's not unnatural that problems will develop due to incompetence, greed, misrepresentation, or even administrative errors. This is where an effective investor complaint process can help you recover undue financial losses. A “Complaint” is defined to include any written or verbal statement of grievance from a client or any person acting on their behalf, former client or prospective client, alleging a grievance involving a firm or representative of a firm.
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While the Chairmen of provincial securities regulators publicize their wonderful contributions to regulation, investors suffered badly. Billions of dollars were lost to unsuitable investments, excessive fees and leveraging, misleading marketing, fraudulent funds and crooked advisers and brokers. Here’s a small sampling of the rattraps retail investors had to endure in 2008.
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“This latest financial crisis [ ABCP] should serve as a wake up call for Government to finally take action on reforming the regulatory system and providing investor protection that isn't dependent upon self regulation and the charity of an industry that has a history of creating structured investment vehicles that can't be understood by ordinary investors, and exemption orders to allow regulations to be ignored” –Stan Buell, President, Small Investor Protection Association, www.sipa.ca
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This Guide has one purpose: To assist your efforts at obtaining a restitution recommendation from OBSI.
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INVESTMENT FUNDS IN CANADA AND CONSUMER PROTECTION
STRATEGIES FOR THE MILLENNIUM
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“.. Mr. Diekmeyer, 73, says he lost $800,000 - his life's savings - when Bre-X collapsed. He also saw his personal friend and stock broker kill himself in 1997, riddled with guilt about his clients' losses."I survived with great difficulty and a friend of mine committed suicide over it," says Mr. Diekmeyer, who lives in a modest apartment in Beaconsfield, west of Montreal. "I only know this story. I'm fairly certain there are others that are equally disastrous…"
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One of the big issues among
mutual fund investors is that they tend to only look at returns,
particularly short-term returns, when approached by their adviser. Risk
considerations are way in the background until the losses pour in some
time later. During the tech boom some investors held 80-90 % of their
portfolio in “exciting” telecom, Internet and advanced science and
technology funds. In 2001-2002 they plummeted and have not recovered to
this day. A number of funds were shut down or merged out of existence.
BUT the losses didn’t disappear for the hapless investors who were
persuaded to buy them.
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Fed up with dealing with the
salesperson who can only sell you mutual funds? Want to get away from
high MER’s? Concerned about the mutual fund trading abuse scandals?
Want more flexibility on when you can buy or sell units? Do you like
the idea of limit orders and stop loss orders? Feel comfortable with
making investments on your own? Looking for a different asset class?
Exchange traded closed- end funds (CEF’s) may have a role to play in
your portfolio.
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The basic idea of a dividend fund
is to invest in blue-chip companies’ common or preferred shares that
pay a steady flow of increasing tax -advantaged dividends. Holdings
typically include the common stock of banks, pipelines, power utilities
and insurance companies. According to the 2001 TSE yearend report only
57 Canadian stocks paid dividends non-stop for the past 25 years versus
100 companies 25 years ago.
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Exchange traded funds have been
called the next generation of mutual funds. They are attractive to
individuals and institutional investors because they provide liquid,
cost efficient exposure to a broad range of asset classes.
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We often hear from the mutual
fund industry about the benefits of “professional portfolio
management”. These smart, well-educated dedicated mavens use
sophisticated analysis tools, exceptionable databases, and
meetings/conference calls with companies.
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Securities rules (National
Instrument NI81-102) require that a money market mutual fund have all
its assets invested in cash (or cash equivalents) and debt instruments
that have a remaining term to maturity of not more than 365 days and
that have an average term to maturity of not more than 90 days.
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No one it seems actually obtains the wonderful mutual fund pre-tax returns
so prominently displayed in newspaper ads during RSP season. Why is this so?
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Compounding is the process by
which income is earned on income that has previously been earned. The
end value of the investment includes both the original amount invested
and the reinvested income.
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Turnover is an important measure
in many fields of business. In manufacturing, inventory turns is the
ratio of production cost of sales divided by average inventory for the
period, typically one year. In the human resource field, employee
turnover is calculated by taking the number of positions filled to
replace departed employees and dividing by the average number of
employees for the period, again typically one year. In the first case,
the turns ratio provides a pretty good idea of how assets are utilized
and production cycle time. In the case of personnel management, a low
turnover rate indicates a stable workforce and a high turnover rate
might indicate some internal issues. In either case, the metrics are
useful and indeed are often considered key indicators of organizational
performance. Regrettably, portfolio turnover as defined in National
Instrument NI 81 – 101”Mutual Fund Prospectus Disclosure”, is a lot
harder to interpret and use.
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