The set-up is like a book club. One Saturday a month, Traci Myles and two girlfriends commune over coffee at one of their Vancouver homes. The host serves treats, someone takes notes and another leads the meeting.
But Ms. Myles and her friends aren't dissecting the latest bestseller – they're unloading their financial baggage.
“It's embarrassing to be real about where you're at,” says the 38-year-old self-employed event planner who started the group in March. “But we help each other as a team, we help each other with our group goals.”
It's something they felt unable to do before the recession swept through their lives. And it took courage to open up despite the ties of their friendship.
“We consult each other and say ‘Hey, I heard about this opportunity, what do you know about it?'” she says.
“It's like a sounding board.”
Friend-to-friend money groups have soared in popularity since the market crash gave Canadians a financial wake-up call. Friendly over-the-fence chats about finances have also become more common in the past year. And though it's a welcome change to see friends talk about everything from their investment portfolios to their bank payments, the new-found openness among friends can be risky, experts say.
Friends might offer ill-suited advice or even unknowingly guide friends into scams and financial traps.
“One of the dangers we've seen is that sometimes people think that they're more financially literate than they actually are,” says Casey Cosgrove, director of the Canadian Centre for Financial Literacy. “What could happen is you have somebody who has some knowledge, but in their peer group their seen as being an ‘expert.' That can be dangerous when you're talking about investing other people's money.”
Because they trust the other person, some people take financial advice or opportunities endorsed by their friends at face value.
Take, for example, the latest “Ponzi-like” scheme in Alberta. Thousands of investors across North America lost more than $100-million in a scam allegedly orchestrated by Milowe Brost of Chestermere, just outside of Calgary. Gloria Lozinski said her sister Edna Coulic committed suicide after losing $300,000 to the scheme. A friend had invited her to invest and was paid $5,000 to do so, Ms. Lozinski told The Globe and Mail.
The scam was designed for friends to entice other friends, according to San Diego accountant Graham McMillan, who started a watchdog website against The Institute For Financial Learning, the alleged source of fraud, after his father lost (and luckily regained) $50,000 to it.
Dani Rohs, a morning show co-host on Calgary’s Vibe radio station, started a money group for women, where they can get together and openly discuss their personal finances.
“Almost entirely this was word of mouth,” he says. “People talk and it just doesn't matter what it is from buying a car to investing, and everyone's always looking for an opportunity.”
Affinity fraud, or “fraud among friends,” in which a scammer weasels his way into a social circle, is a quickly spreading phenomena, says Andy Poon, spokesperson for the British Columbia Securities Commission which aims to educate investors.
“We depend on these people for support and advice,” he says. “Unfortunately, because of the closeness and trust, these provide a perfect setting for con artists, for people who go in and use the group as a way to make contact with other potential victims.”
Even when fraud is not a factor, relationships can be compromised when friends discuss cash.
Successful investor Jim Chuong is wary of talking finances with his buddies after it cost him a few friendships. The 37-year-old Toronto salesman for pharmaceutical giant Alcon, says his friends used to ask him for advice all the time. But when their portfolios didn't mirror his own, they grew upset with him and accused him of withholding the secrets of his success.
“I thought I could help by sort of telling them what I do, they could do the same thing and this is what they'd need to do,” he says. “Some people were less interested in doing it themselves, instead they were like, ‘Why don't you just tell me what to do?'”
Investment talk is a whole different and much more severe realm of conversation than regular finance chat, says Gail Vaz-Oxlade, the Brighton, Ont.-based host of Til Debt Do Us Part , a financial makeover show on Slice TV.
There's also a big difference between taking advice from friends and sharing tips and information, she adds, cautioning against the former.
“Is your friend that's giving you this advice an investment specialist? Would you say to your friend, ‘You know, I have a really bad pain in my side, would you take my appendix out please?'”
That's why it's a good idea to combine the support of friends with the advice of professionals.
Dani Rohs, a 28-year-old morning-show co-host on Calgary's Vibe radio station enlisted the help of a financial adviser from Alberta Treasury Branch Financial to give advice to women in her 15-member money group, which held their first meeting last week.
“We can share tips and stuff, but we're not experts,” she says.
But the simple act of sharing these stories in a safe, confidential environment with their peers has done wonders for these women's financial self-confidence, she adds.
“We're all becoming smarter with our money and talking about different ways to save.”
Jason Drummond, who joined a Kitchener-Waterloo, Ont., money group in April, says he was able to cut his monthly grocery bill in half from $600 to $300 thanks to the money-saving tips he gleaned from the other three members. He's also been able to pay off much of his household debt.
“No one used to talk about money beforehand,” he says, thinking back to this time last year. “It's better that we are, because then you understand when you make mistakes you know right away and can correct them.”
