When people make a living selling products, they sometimes stretch the truth to make a sale. It certainly happens in the financial industry, where people spout all kinds of nonsense to get investors to buy what they’re selling. Here are 12 examples of untruths told by investment advisers who put making the sale above what’s best for clients:
“Government programs can’t be counted on in your retirement planning.”
The classic sales hack’s line, designed to get you to invest more money. Fact: The Canada Pension Plan has been actuarially certified as sound. You’re paying a good buck in CPP premiums – that’s why the plan is safe.
As for Old Age Security, the federal government has announced its intention to make changes that will keep this benefit sustainable over the long term. It’s worth noting that some experts believe the OAS would be affordable even if nothing were done.
“Everyone’s losing money.”
Current market conditions are a real test of an adviser’s ability to construct a portfolio. With a strong emphasis on quality and a willingness to use bonds and guaranteed investment certificates despite low yields, investors can make money even while the markets lurch this way and that. This is a bad time to be an adviser who doesn’t understand how to control risk.
“Brains are more important than fees.”
Low fees are the one variable that you can control as an investor. Fund manager brilliance? In most cases, it’s a marketing construct designed to justify high fees. Low-fee products are not an automatic buy, and neither is the lowest-cost option in any category. But anyone who suggests you ignore fees and concentrate on expertise is ignoring the basic rule that lower fees leave more for investors. In investing, you get what you don’t pay for.
“This diversified wrap product I’m selling you is better than your individual stocks.”
You know those blue-chip dividend stocks you own? The ones that increase their payouts every year and have brought some welcome stability to your portfolio in the past year or so? Well, they are NOT generating any income for your adviser.
This problem can be easily fixed by replacing your stocks with wrap products, which ramp up diversification by combining various types of assets. Too bad the fees are so high, and the products themselves so inconsistent.
“I will pick the best possible investments for you.”
Many advisers are licensed only to sell mutual funds, so they won’t suggest you invest in cheaper exchange-traded funds or directly in blue-chip, dividend-paying stocks. But that’s not the only way advisers shrink the world of possible investments for their clients.
Some also knuckle under to their firm’s directive to foist certain investments on clients. Would these investments be on the firm’s hot list because they’re ideal for investors? No, it’s because they’re highly profitable and easily marketable.
“I’m okay with your small account.”
Advisers may say this because they’re too nice to tell you to hit the road, or because they see you as someone who will grow richer over time. Either way, you should expect to be treated like a deadbeat relative – “Here’s your mutual fund portfolio, have a nice life.”
In fairness, the economics of being an adviser just don’t work for small accounts. In one way or another, advisers are typically paid for the work they do through fees set as a percentage of a client’s assets. Small accounts mean small paydays.
“I have a great investing opportunity but you’ll have to write a cheque to me personally.”
