Financial advisors, huh, yeah, what are they good for?

The February 28th, 2014 episode of CBC Marketplace featuring “financial advisors” and the questionable advice they sometimes offer has made a few waves. If you haven’t watched it, it’s worth a look. The “advice” featured was pretty awful and made little sense. At best, the advisors shown were poorly trained. At worst, well… you be the judge.

If you recognized your current advisor among those profiled – pixelated though he/she may have been to protect his/her identity – it’s time to ask some serious questions at your next meeting. However if your advisor wasn’t featured – with only a handful of an estimated 100,000+ advisors in Canada there’s a pretty good chance of that – or if you don’t have an advisor, you were left wondering if all financial advisors are know-nothing posers or fast-talking scam artists. Most of the 1000+ comments attached to the episode weighed-in with a common response: “Dump your advisor and become a Do-It-Yourselfer.”

I have strong feelings about the way the industry is set up and sadly I wasn’t all that surprised by what I saw – even though I was disappointed. In that context I can sympathize with the DIY point of view, but in the real world of busy lives, complex rules, competing goals and priorities, a lack of financial education and *gasp* emotions, I know DIY is not the correct route for many, and probably most Canadians.

(As an aside, Do What Yourself? DIY is usually suggested in the context of investment management, but financial advice is about far more than just investments. That will be a common theme on these virtual pages.)

In all fairness it’s important to ask whether the Marketplace findings are representative of the industry at large. Fortunately, the intrepid hosts of the Because Money Google On Air Hangout/Podcast (henceforth and forever more referred to as “Because Money”) were able to get a behind-the-scenes look by inviting the Marketplace expert guest Preet Banerjee on the show. They had an opportunity to discuss the raw footage he saw, what the causes of poor financial advice are and perhaps what can be done about it.

Not surprisingly, reality was more of a mixed-bag, with (by Preet’s estimates) about 40% of the advisors giving poor advice and the rest falling somewhere along the continuum from ok to good. In his opinion it would have been a better episode had Marketplace shown a more even balance of good and bad advice so the public recognizes there are good advisors out there and is encouraged to seek them out. Preet also made the point that an entire firm shouldn’t be tarnished because the single advisor featured from that firm gave poor advice, since there are good and bad advisors at most firms.

I wish Marketplace had shown some examples of good advice, not just so the public is aware that good advice exists, but also what it actually looks and sounds like. As noted during Because Money, Canadians seeking financial advice often can’t distinguish good advice from bad, or even a good advisory process from a bad one.

And why should Joe and Joanne Canuck know? There’s very little financial literacy training in schools at any level. In Ontario and most Canadian provinces anyone can call himself or herself a financial advisor: the term is not protected or regulated, though most Canadians probably assume it is. There are a ton of designations, titles, licences, and service models to choose from, and no single well-known, well-understood, recognizable and standardized deliverable called “good financial advice”. That leaves the average person looking for it in quite a pickle.

In my next few posts, we’ll look at how the industry is set up, some of the main issues with this arrangement, and some ideas the industry, regulators, industry watchers, and (why not!) I have to help people find good advisors.


Hello World.

In my previous life I was immersed in the world of software development, and it still influences how I think and work today.

In that world, there is a time honoured tradition that the first program used to introduce newbies to a programming language is “Hello World”. It is short and simple, yet can provide some valuable insights.

Hello world program in C++

A sample “Hello World!” program in C++.
Yes, I’m a computer nerd. I’m a money nerd too.

While the first two adjectives above don’t describe me (perhaps debatable?), I do hope to provide the latter.

When it comes to their finances, Canadians don’t need MORE data… there is a TON of data out there already on every subject you can imagine. What they need are insights to help make sense of all the information and conflicting opinions, to simplify the jargon and cut through the BS, to understand in practical terms how it impacts their lives and finances, and to help them answer the question “Now What?”.

With this blog I hope to share my thoughts and perspective as a “logic and numbers” guy, but also – thanks to my experience as a money coach and fee-for-service financial planner – some of the more subtle factors that affect our attitudes and behaviours around money. I’ll also comment on how the financial advice industry operates, to what degree it serves the needs of Canadians, and discuss some ideas regarding how it might be made better. I hope that being both part of the industry yet outside its mainstream will allow me to bring a fairly unique perspective.

So Hello World. It’s good to be here.