Financial advisors: Hidden camera investigation (CBC Marketplace)

tonight on Marketplace, nice to meet you, it's tax time and we're going to put

financial

advisors

to the test, the people you trust with your money, they're kind of snakes in the grass. I would put all my faith in them if this person was doing that job. No, absolutely not, our

hidden

camera

s will be detected. Do your pants shine? um no, while we reveal outrageous promises, it's almost like a free ride and advice that will make you say: show me the money we're in G onario, this CU you're picking me up. Now connecting to Melissa Carrero, 32-year-old fitness instructor, how are you feeling?

Have you ever used a

hidden

camera

? A little anxious. I won't lie. Melissa will use three hidden cameras while she seeks money advice. like they are yelling at you although you probably wouldn't have a clue if I met you on the street how everyone can tell everyone is looking at me no you look good our undercover moms are conservative with their money and for this Mission she will be sharing her

financial

details and there are a twist on this test. I have one last thing for you $50,000 in Cold Hard Cash there you go, don't get too excited, it's not real, but that's the money you'll tell your

advisors

you have.

To play with the perfect Melissa will say that she has an inheritance of 50 thousand dollars, which is approximately what the average Canadian has to invest. She's going to try what the financial advisors tell her to do with all that cash we're sending to the big five. banks and a few other large financial entities chosen at random and through our research, approximately a third of Canadians rely on advisors and the stakes are high. I lost my house, my marriage, and my family, all because I trusted a financial advisor. It bothered me because I plan to uh, retire comfortably they didn't ask me the right questions to make an informed decision hello priest, it's a pleasure to see you, it's a pleasure to see you again helping us evaluate the visits of Melissa PR bannery, a financial expert who knows the world of financial advisors because they used to be.

I have a strange feeling that we're going to see some scenarios that I'm not going to like. We have a checklist for financial advisors. I was wondering if a financial advisor would be available to talk to for sure. Check it out. First, what do they tell Melissa about debt? What is the credit limit and what is pending? Remember that Melissa owes about a hundred thousand dollars. Our expert says the advisor should tell you to use some of that inheritance to pay off that debt right now. We are in a low interest rate environment, even investments are not projected to grow very quickly right now and if Melissa is conservative, as she appears to be, then there is merit in paying down debt; some advisors do it well, like at bimo.

A safer W-day, plus, you know, pay off your debt as soon as possible at Investors Group. Some will pay the debt. There will be some rsps. This guy says pay that debt, but there's no rush. You're going to be in debt for the rest of your life, there's nothing to fear, it's just the reality of living in these times, on an initial visit, mentioning debt is crucial, says PR Bannery so advisors have the full picture. Could you see a scenario where it would be nice if a financial advisor hardly ever asked about debt, but that's exactly what happens at Dunde Weald, now called Hess Wealth.

The advisor doesn't even mention debt until Melissa mentions the one thing we're not sure about. is in debt to us, you know, we thank you for your debt, yes, yes, and how come most financial advisors in Canada don't actually make money by recommending that you pay off your debts, whereas if you invest money, clearly Is there money to be made involved? in that transaction, so even if paying off a debt might be in the client's best interest, they may not recommend that right and I think this is a huge conflict of interest that people need to be aware of, so the conclusion is to talk about the debt with your advisor and see if they recommend paying it off in Barry Ontario, so that's it here.

Cory Wickham takes us past the house he used to have before he returned. Bad financial advice cost her his marriage and his home, a lot of hard work and many hours to make it happen. Everything was taken by his financial advisor. I'm going to have to file for personal bankruptcy now that he lives at a friend's house. His advisor convinced Corey and his wife to sign up for loans. I put all my faith in them and then invested the borrowed cash. here is a loan for $16,814.23 80 investments collapsed and the lenders came looking for their money, what do you mean I am responsible for $150,000?

Going by these were the possibilities, it was then that Cory discovered that his advisor had signed him up for high-risk investments. The thing is, Cory doesn't like risk. There's no money, it's too hard, it's hard to get and I worked really hard to get to where I was. obtained, so we are checking to see if financial advisors ask Melissa how she feels about risk. At the end of the day, I would never want to not make money and lose money on my investment. Some advisors suspect risk with Melissa like at RBC, so in 2008, if he had invested in this portfolio, she would have lost 24.1% of his investment.

Yes, it's a little disconcerting, Sam, but at Prim Marica these reps ask about everything. Does she have any other responsibilities, like she knows Deb or the mortgages, except how comfortable Melissa is. It's with risk I have an investment strategy to share with you okay, okay, we are not going to take risks today, we will leave it for another day, it will be somewhere, a simple story, she asks, are we going to talk about risks? and he says, yeah, later it's a simple story, right, yeah, risk is generally not a simple story because if it were a simple story there wouldn't be so many people burned by risk in the investment markets.

PR says be careful, financial advisors can make more money guiding you. In riskier investments, there is a conflict of interest for some advisors who want to be riskier with their portfolio because it means that if your portfolio is bigger, the pay is a little higher, so the bottom line is to be firm about your risk tolerance and check the paperwork to make sure they have it right next on our checklist something we call promises promises how much do advisors say they'll make Melissa if she invests her 50 shares of Grand Bank oil stock index link gic's various for Cali first prach says you should know that advisors sell products.

I mean, all financial advisors will, to some extent, wear a sales hat, it's just that some are a little more salesy than others, so if we buy, they make money for themselves or their companies. Tax free savings account with nrsp mutual fund. stocks bonds canadian gic stock bonds etc. at Primerica it's surprising to hear these advisors claim that they don't want to sell anything we're not here to sell products you know well it's not oh this is fantastic look at them it's Lisa but they sure suggest hefty profits based on how they say markets have fared in the past in each segment of 10 to 20 years.

Yes, they typically have a 10-12% historical rate of return and mention that a high return over and over again will probably yield 10-20 years. 12% earn more, maybe get 10 20%, so earn a little more than 10 TR, yes, yes, potential. Okay, what do you think when you see this advice being given? You can't go around telling people that you should wait 10, 12% and, hopefully, more. that because you can't back that up and that sales job is nothing compared to what Melissa is about to hear after a year you should be able to get an extra 10,000 that's ridiculous it's free it's almost like a complete free ride BS and what happens when our hidden cameras are detected.

Hey, it looks like you have lights in the back of your pocket. Oh, when we come back, our undercover fitting room is equipped with hidden cameras. Melissa Carrero is helping us test financial advisors in Southern Ontario. big fear of getting caught and guess what your pants are glowing um no it's really weird maybe wearing like a linen shirt is thinking it looks like you have lights in the back of your pocket oh she went on to describe to me what my pants looked like pants. As they glowed, what was going through your mind, uh, turn around and run, she was wondering if it would be appropriate for me to just walk away.

Lucky For Us Melissa talks her way out of this and keep trying and you won't believe what happens. Then she's just at Dundee Rich's doorstep, now her name is Hollis Rich, please bear with us, please, and the advisor suggests that she can win him a package with her inheritance of $50,000. she still hasn't made 10,000 after a year or 15,000 or maybe 20,000 after a year, so you're laughing. Yes, that is some of the worst advice I have ever heard in my life. It's ridiculous. Why does he make such extravagant promises? Frankly, either he's incompetent or he's lying, those are the only two possible responses to give an answer like that to someone who says he's a conservative investor.

Have you ever heard of something like this? Oh, this sure happens. I wouldn't say all the time. but think about it if someone comes up to you and says hey listen I can make your money double in a year that perks up a lot of people's ears because we want to make money so takeaway doesn't show your money if The advisor promises great returns The mutual fund is a pool of money Many of the conversations about mutual funds make sense because that's what most of us buy, but we don't seem to know what we're paying for Please, please, tell us what. your fees are that's all I'm asking for so at the end of our checklist how direct are advisors when we ask about fees okay let's look at our next piece of tape.

I'm afraid at Investors Group, the advisor is quite vague about the fees that not the lowest fee people out there, we are not the highest fee people, we are above Montreal bank, below RBC, finally a number, um, from 1% to, I would say, below 2% in Money Concepts, can you figure this out? We receive a PR trading commission rated monthly based on our average monthly assets turns out the financial industry doesn't have to tell you how much it can cost you to invest in dollars and cents, but check it out if Melissa invests her 50,000 in mutual funds and they grow 6%. one year after 25 years, you'll have $214,000, not bad, but you'll pay a management fee of about 2% of all your savings each year, so by the time you're ready to retire, those fees will have gobbled up $100,000 and that money It will be split between firms and advisors if you talk to your advisor about fees and they give you a song and dance or are not open and honest about it, that should be a red flag and there are sure to be red flags at Edward Jones it's free it's almost like a free ride it's free it's a free ride he says it's never a free ride this advisor is talking about mutual funds in the end he admits there is a fee so they are charging him 2% okay but listen This, it says that Melissa will only pay for the amount that your investment generates on the growth of the 50,000, okay, so if you have 50,000 grew by 1,000, then be 2% on the thousand, yes, 2% on the thousand, it would only be about what those 50,000 have generated. she's done it correctly, right, yes, quite well, yes, it's complicated, but it's okay.

I'm trying to make sure I don't use bad words right now. That was an epic failure, an epic failure, an epic failure, complete and utter. BS, how deceptive this guy is. incredibly misleading, you can't, you categorically can't say that's not how mutual fund fees are charged in this case, if it were a 2% fee, it's 2% on everything in your account, if the market goes up, if the market goes down. It doesn't matter, there may be no ill will here, he just doesn't know what he's doing. It's hard to say without being inside his head, but I have a feeling he knows Melissa's take on everything best.

I believed. I looked for it. information from him and he gave me information from the lady and when she goes to RBC to ask about the fees, is it just about what we are earning or is it our total amount that is there? Melissa's search for a straight answer fades again, that fee is um um, it's in the fun return percentage, so I'm sorry, I just want to make sure I'm thinking about this correctly, like it's not just a matter of say if I can find an easy definition, mhm, I want to understand it. this television why was it like that.

I can't even explain how bad it was. If you can't explain the fees for a mutual fund that is such a popular investment in Canada that Canadians invest almost a trillion dollars in them, you shouldn't call. yourself, a financial advisor, period, so hold on to your cash until you understand what you're paying for, so who's giving us advice? The people Melissa visits have a variety of credentials, but the bare minimum to obtainA license as a financial advisor is an online service only. course and a multiple choice exam, you need 60% to pass it, it all means one thing for the pre-flag fire: be careful, there are many great financial advisors, but there are also many bad ones, so it makes sense to take the Es When trying to find the best one for you, why don't any of the financial organizations send out hidden cameras and just test their own staff like we did?

That is a good question. I think they might be afraid of what they might see, uh, I think. you know there are a lot of problems, it turns out yes, we found out that regulators in Canada are now planning their own mystery purchases, but they don't want to talk to Marketplace about our results and the companies we visited, we contacted all 10 of them asked an interview with several but none spoke as for the dunderiqueza advisor 10,000 after a year or 15,000 in a statement, his company accepts responsibility and says that the advisor does not normally handle requests of this nature, he says he made a mistake and was suspended and although Primerica didn't offer us an interview, these guys did have an offer from Melissa to help you get licensed so that could be our second career.

Yes, she can become an advisor too. That's what you were looking for. No, I mean, she was looking to them for advice. I didn't need a sales pitch. How could I know? Join your team. Our covert test is already done. So next time you're shopping for financial advice, visit our website and take our checklist with you.