Financial advisors: Hidden camera investigation (CBC Marketplace)

tonight on marketplace it's tax time and we're putting financial advisers that people you trust with your cash they're kind of snakes in the grass do the test I put all my faith on should this person be doing that job nope absolutely not will our hidden cameras get detected as we reveal outrageous promises so that is free drive and tips that'll have you saying show me the money [Music] we're in Guelph Ontario this could you pick me up they're wiring up 32 year old fitness instructor Melissa Carrero are you feeling different worn hidden camera before a little bit anxious I won't lie Melissa will be wearing three hidden cameras as she shops around for money advice kind of feel like they're screaming at you even though you probably would have no idea if I just met you on the street like everybody can tell everyone's staring at me no you look good our undercover mothers conservative with her cash and for this mission she'll be sharing her financial details and there's a twist to this test I've got one last thing for you $50,000 in cold hard cash there you go don't get too excited it's not real but that's the money you're gonna tell advisors you have to play with felissa is going to say she's got an inheritance of 50 grand that's about how much the average Canadian has to invest she'll test what financial advisors tell her to do with all that cash we're sending her to the Big Five bank and some other big financial outfits chosen randomly and through our research about one-third of Canadians rely on advisers and the stakes are high I lost my house and my marriage and in the family all because I trusted a financial advisor it got me upset because I plan to retire quite comfortably the right questions were not asked for me to make an informed decision I breathe nice to see you nice to see you again helping us assess Melissa's visits preet Banerjee a financial expert who knows the world of financial advisors because he used to be one I have a funny feeling that we're gonna see some scenarios that are not gonna like hmm we've got a checklist for financial advisors first up what do they tell Melissa about debt what is a credit what you have outstanding remember Melissa owes about a hundred grand our expert says advisers should tell her to use some of that inheritance to pay down that debt right now we're in a low interest rate environment even investments are projected to grow very quick right now and if Melissa is conservative which she sounds like she is then there is merit to actually paying down the debt some advisors get it right like at ad investors group song paying off the debts there'll be some put in it are ESPYs this guy does say to pay that debt down but there's no rush you are going to be in debt for the rest of your life it's nothing to be afraid of it's just the reality of living in these times in an initial visit bringing up debt is crucial says pre Bannerjee so advisors get the full picture could you see any scenario where it would be okay for a financial advisor not to ask about debt almost never but that's exactly what happens at Dundee wealth now called Hollis wealth the advisor doesn't even mention debt until Melissa brings it up the one thing that we're not sure about is in our debt yeah most financial advisors in Canada don't make money recommending that you pay down debt whereas if you invest money then clearly there's money to be earned involved in that transaction so even if paying off a debt might be in the clients best interest they might not recommend that right and I think this is a big conflict of interest that people need to be aware of so the takeaway talk about debt with your advisor and check out if they recommend paying it down in Barrie Ontario so this is it here Quarry Wickham takes us past the house he used to own before bad financial advice cost him his marriage and his home lots of hard work and lots of hours to have it all taken away by her financial advisor I'm gonna have to declare personal bankruptcy now he's living at a friend's place his adviser convinced Cory and his wife to sign up for loans yeah I put all my faith in them and then invested that borrowed cash here's one loan for a hundred and six thousand eighty one dollars and eighty cents the investments tanked and the lenders came looking for their money we mean I'm responsible for a hundred and fifty thousand dollars hope that that's ludicrous that that's not what was supposed to happen and nor was it ever explained to me that this was gonna these were the possibilities that's when Cory found out his adviser had signed him up for high-risk investments thing is Cory doesn't like risk no when he's too heard it's hard to come by and I worked really hard for to get to where I had gotten so we're checking to see if financial advisors ask Melissa how she feels about risk I wouldn't ever want to at the end of the day not make any money and lose money on my investment some advisors thought that risk with Melissa like at RBC so in 2008 if you were invested in this portfolio you would have lost fam but at Primerica these reps ask about everything except how comfortable melissa is with risk okay okay yes subway simple sorry she's asked so we're going to talk about risk and he says yeah later it's a simple story all right yeah risk is general not a simple story because if it was a simple story there wouldn't be so many people who have been burned by risking the investment markets Preet says be careful Financial Advisors can make more money steering you into riskier investments there is a bit of a conflict of interest for some advisors to want to be more risky with your portfolio because it means if your portfolio is bigger their paycheck is a little bit bigger so the takeaway be firm about your tolerance for risk and check the paperwork to make sure they got it right next on our checklist something we call promises promises how much do advisors say they'll make Melissa if she invests her fifty grand Bank sauce boil stocks index-linked GIC sorry cheese for calibrate first breach says you should know advisors are selling products I mean every financial advisor to some degree is gonna wear sales hat it's just some are a little bit more salesy than others so if we buy they make money for themselves or their companies tax-free savings account with them in RSP mutual funds stocks bonds Jesse's can find etc Oprah for America it's surprising to hear these advisors claim they don't want to sell a thing break is like oh this one is for time saver with them as he said but they sure suggest hefty profits based on how they say markets fared in the past yeah every segment of ten to twenty years there is usually called a historical rate of return of ten de tráfico and mentioned that high return over and over spend probably will make about ten to twelve percent make more maybe get ten twenty per second per to make an even more than average family yeah yeah okay what do you think seeing this advice being handed out you can't go around telling people that you should expect 10 12 percent and hopefully more than that because there's you just can't back that up and that sales jobs nothing compared to what Melissa a boat to hear after years good to get an extra ten thousand apiece that's ridiculous please fruits are free right complete and utter BS and what happens when our hidden cameras get detected it looks like you like oh when we come back our [Music] undercover tester is rigged up with hidden cameras Melissa Carrero is helping us test financial advisers in southern Ontario her one big fear getting caught and guess what oh she continued to describe to me how my pants looked while they were glowing what was going through your mind to turn and run I wondered if it would be appropriate for me to just walk away lucky for us Melissa talks her way out of it and keeps on testing and you won't believe what happens next she's barely in the door of Dundee wealth now called Hollis wealth fairness place and the advisers suggesting he can earn her a bundle on her $50,000 inheritance Wow and he's not done yet so you're laughing yeah that's one of the worst pieces of advice I've ever heard in my life that's ludicrous why is he making such outlandish promises quite frankly he's either incompetent or he's lying those are the only two possible answers for giving an answer like that to someone who says that they're a conservative investor have you ever heard of anything like this oh sure this happens I wouldn't say all the time but think about it someone comes to you and says hey listen I can make your money double in a year that perks up the ears of a lot of people because we want to money so the take away don't show your money if the advisor promises big returns mutual fund is a pool of pool away a lot of the talks about mutual funds make sense because that's what most of us buy but we don't seem to know what we're paying please please please tell us what your charges are that's all I so last on our checklist how straight up our advisors when we asked about fees okay let's look at our next piece of tape I'm scared over at investors group the advisor is pretty vague about fees we're not the lowest fee people out there we're not the high-speed people out there we're above bank Montreal RBC finally a number it from 1% to I would say the low to percents have money concepts can you figure this out you receive a trade commission prorated monthly based on our average monthly assets turns out the financial industry doesn't have to tell you how much investing can cost you in dollars and cents but check it out if Melissa puts her fifty thousand into mutual funds and they grow six percent a year after 25 years she'll have two hundred and fourteen thousand dollars not bad but she'll pay a management fee about two percent on her entire nest egg every single year so by the time she's ready to retire those fees will have followed up a hundred thousand dollars and that money it'll get divvied up among the company and advisors if you talk to your advisor about fees and they give you a song-and-dance or they're not open and honest about it that should be a red flag and there sure are red flags over at Edward Jones this route is free it's free it's a free ride yes never free ride this advisors talking about mutual funds eventually he admits there's a fee in charge of two percent okay but get this he says Melissa will only pay it on the amount that her investment makes both of the 50,000 okay so if you fifty thousand blew by a thousand so be 2% on the thousand yeah two percent it would only be on them with that fifty thousand has he gone okay yeah yeah I'm trying to make sure I don't use any profanity right now that was an epic fail epic fail epic fail complete and utter BS how misleading is this guy incredibly misleading you cannot you categorically cannot say that that is not how the fees are charged on mutual funds in this case if it was a 2% fee it's a two percent I'm everything that's in your account whether the market goes up whether the market goes down it does not matter is it possible there's no ill will intended here he just doesn't know what he's doing tough to say without being inside his head but I have a feeling that he knows better Melissa's take on it all I believed him I looked for information from him and he gave me misinformation and when she heads to RBC to ask about fees is it just on what we're making or is that of our full methods in there Melissa's quest for a straight answer fizzles again that fee is um it's on the percentage of returns by the I want to put my head through this TV why that was I can't even explain how bad that was if you can't explain the fees on a mutual fund which is such a popular investment in Canada almost a trillion dollars is invested by Canadians in them you should not call yourself a financial advisor period so the take away hold on to your cash until you understand what you're paying so who is giving us advice the people Melissa visits have a range of credentials but the bare minimum to get licensed as a financial advisor just an online course and a multiple-choice exam you need 60% to pass it all means one thing for pre Banerjee fire beware there are a lot of great financial advisors out there but there are a lot of bad ones too which is why it makes sense to take the time to try and find the best one for you why aren't any of the financial organizations sending in hidden cameras and just testing their own personnel like we did that's a good question I think they might be afraid of what they might see I think they already know that there are a lot of issues out there it turns out they do we've learned Canada's regulators are now planning their own undercover shopping but don't want to talk to marketplace about our results and the companies we visited we contacted all ten of them asked several for an interview but no one would talk as for the advisor at Dundee Wealth 10,000 FTE or 15,000 in a statement his company accepts responsibility and says the adviser would not typically manage requests of this nature it says he made a mistake and has been suspended and while Primerica wouldn't offer us an interview these guys did have an offer from Melissa will help me get licensed so that that can be a second career yep she can become an adviser - is that what you were looking for no I mean I was looking for them for advice I didn't need a sales pitch on how I could you know join their team our undercover test is done so next time you go shopping for financial advice visit our website and take our checklist with you

Channel: CBC News

Views: 1,294,709

Rating: 4.7875814 out of 5

Keywords: Investment (Industry), Investment Banking (Industry), Investment Company (Organization Type), Financial Services (Industry), Canada (Country), Bank (Industry), Investigative Journalism (Media Genre), Financial Adviser (Profession), Marketplace (Award-Winning Work), Canadian Broadcasting Corporation (TV Network), News (TV Genre)

Id: WtQeQzUfYrI

Length: 17min 37sec (1057 seconds)

Published: Wed Sep 03 2014