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rob carrick

The aging of our population means people who have saved and invested for decades are starting to assess the results.

Let's just say there's some unhappiness out there. Stock market ups and downs over the past four years have left some seniors bewildered and angry about what's happened to their investments.

"We saved," one retiree told me in an e-mail response to a recent column that said inadequate retirement savings are going to spur demand for reverse mortgages. "The market made sure it was not enough."

It's not just the markets, this reader said. "No, indeed, where the blame should be firmly planted [is]at financial professionals and their ignorance of the market trend."

Mad at the markets, and mad at the investment industry. How many aging baby boomers might that describe?

Here's how a 60-year-old reader from Vancouver describes what she's found to be wrong with the financial industry. "I think there's an incredible absence of good, honest advice," she said in an interview. "I see so many people – educated people, professional-class people – who have resources and they're spinning their wheels going from one adviser to the next."

The hefty fees Canadians pay to own mutual fund fees have been criticized lately on the basis that they undermine the returns people will increasingly depend on to fund their retirement. But to focus on fees is to miss a bigger picture that encompasses both investing products and investing advice. After all, built-in fees for advisers are one of the biggest reasons why mutual funds cost what they do.

In the fall, I was asked to appear at annual educational forums staged by organizations that oversee two highly reputable financial planning designations, the Certified Financial Planner and the Registered Financial Planner. Both events were well attended by advisers who gave every indication of being committed, well-informed and conscientious.

But there's a disconnect in some cases between the industry these people work in and the massive demographic wave of baby boomers who (a) have all the money and (b) are coming to a point in their lives where they have never been more in need of financial advice.

It's hard to say if the financial industry even knows what's happening at the customer level. The industry loves to commission polls and surveys that inevitably ratify its world view. Advice is important. Canadians value advice.

I ran a little poll of my own on my Facebook personal finance page on Dec. 8 in which I asked people to complete the sentence: "I think mutual funds are: ______." Many of the responses almost melted my computer.

A lot of the anger out there has to be linked to the market ups and downs we've been subjected to since summer, 2007. But it's starting to appear as if there's more to this than a sense of frustration with undependable stocks and low interest rates. Trust in the entire investment industry has been worn down. A lot of what was said and sold to investors hasn't worked.

Falling markets upset investors, while rising markets pacify them. The unhappiness might blow over if investors find that the products they were sold and the advice they received was, after all, on the money. The experience of that 60-year-old Vancouver reader suggests this is no sure thing, however.

She's on her fifth adviser, which tells us she may be what they call a difficult client. Still, her criticisms are worth hearing. Two of her advisers distinguished themselves with a stock picker's approach that included recommendations to buy Ballard Power (down 83 per cent over the past five years) and Citibank (down 95 per cent over the same period). Another worked at a financial planning firm that charged stiff fees for what amounted to management of a portfolio of guaranteed investment certificates. Another suggested replacing a perfectly good low-cost mutual fund with a high-cost wrap product.

"I didn't do my due diligence until I was getting near the retirement cliff," this reader admits. "I was busy taking care of my life and raising my children, putting money aside and listening [as stocks fell]to people saying: 'Oh well, that's the market, it will take time.' "

Her diagnosis of what's wrong with the client-adviser relationship: "People aren't pushy enough asking questions."

Get ready, investment industry. Exam time is coming as baby boomers retire and start to look at what decades of saving and investing got them.


I think mutual funds are ...

More than 70 subscribers to Rob Carrick's Facebook personal finance page completed this sentence: "I think mutual funds are _____." Some responses:

On the positive side

"A great way to diversify your portfolio, especially the ones with low MERs."

"A good choice for people who don't have the knowledge or the time to learn the intricacies of investing."

On the negative side

"Past their prime."

"Like buying and eating a cheap hot dog. Never know what is inside them and more than likely the damn things repeat on you."

" ... How can the industry justify paying 'fund managers' (MER) when a fund registers double-digit negative returns?"