Putting your money in the wrong hands

Ivan Cons

March, 2010

As many of you are aware, we are in the midst of an RSP campaign. We are bombarded with reminders to make our contribution and to review our retirement portfolios.

For many of you holding RIFs, the RSP season is a thing of the past. The focus becomes how to hold on to your money without encountering major losses. The sad reality is that over the last 10 years, the equity markets have delivered just that: losses.

On top of the losses, there are other disturbing trends. People entrust their money to financial advisers who ravage their accounts with no regard to accountability, and ruin their retirement. By the time they figure it out, most if not all of their money is gone, and usually there is no restitution.

Many people simply do not know how to deal with money. The prospect of someone looking after it for them is a big relief. In one instance, I have seen a client’s RSPs reduced from $120,000 to $13,500 in the course of seven years. The broker kept trading the client’s entire retirement fund in highly speculative penny stocks. How does this happen?

Easy. The client was trusting and the broker was unscrupulous, forging signatures to alter the client’s investment profile in accordance with the way he was investing their funds. The client, of course, was unaware of this transgression until several years later.

In addition, the broker no longer works for the firm, which denies any responsibility.

What is the client supposed to do? The most obvious answer is to launch a complaint and open a formal investigation with the AMF (Autorité des marchés financiers), the regulatory body in Quebec that has been in the spotlight recently, trying to show they have a handle on policing transgressions.

Unfortunately, these transgressions have been allowed to fester on their watch for many years. Keep in mind that opening a file with the AMF is a lengthy process and can become very costly if pursued legally. What ends up happening most of the time is people become resigned to their loss, which is tragic.

We need to demand more accountability and responsibility from the investment sector. Investment firms must take more responsibility for rogue advisers and misdeeds perpetrated against their clients.

There is a bond of trust established when monies are handed over to a firm. This trust must be upheld at any cost. More importantly, we must be vigilant when it comes to their accounts.

It is your responsibility to check your statements online – daily if possible and to verify all transactions on your account. Insist on copies of all paperwork completed by the adviser.

Never sign uncompleted documents, especially documents that are generally known in the industry as KYC forms or Know Your Client Forms. These documents express specifically the nature of your risk tolerance and can unequivocally support any transgressions of your investment intentions.

Any purchases or trades should be verified. If you are not happy or suspect any foul play, speak to the compliance officers in the firm.

If it all seems overwhelming, perhaps it is advisable to stick to such basics as fixed income investments like GICs.

Whatever you do, remember it is your money and if it sounds to be good to be true, it probably is.