FURTHER TO DUTY OF CARE OWED TO CLIENTS
(easy steps to elder abuse in Canadian financial services industry)
My time working in the financial services industry gave me some interesting insights into the relationship between client and advisor or salesperson.
It reminded me a great deal of the dependant kind of relationship that exisits in a few other fields I am aware of. One is my local flight instructor, who holds my life in his or her hands, my future ability to fly, perhaps to earn my licence, perhaps to earn my living in this area. Another is the local hockey coach who may have players who hope to have a future in hockey. The player, as well as the flyer become so dependant on the good graces, good references and support of the instructor/coach that never will they think of questioning the behavior, the advice, or the activities of that person. Even when they cross over to improper behavior. To speak out might seriously impair the ability to progress and proceed to your goals.
Similar relationships exist between investment expert and client. The typical elderly client, may be trusting, vulnerable, alone, uninformed, basically a very easy target for a financial predator. The advisor is usually, young, informed, confident, backed by a very large firm, and full of promises of care and service. The balance of power between these two parties is so significant that those who fall victim to the odd financial services predator have virtually no chance in Canada. They often rely so heavily on their financial person, that they may never find out that they were ever abused. Firms are not yet doing the proper job of protecting clients, and in fact are far more active in self protection, secrecy, and limiting their liability if one looks at the many cases on record.
Those few who would abuse clients know this, and as an added bonus, are aware that the oldest, most vulnerable, most alone clients out there, may also have the most money. It is a relationship that requires the highest standards of care, and so far all I can point to is that we have the highest standards of talk and advertising promises in Canada. The care is yet to come.
To learn more visit
www.sipa.to small investor protection association
www.regulators.itgo.com website of industry indiscretions
Friday, March 11, 2005
Do advisors owe clients a duty of care?
In a recent case where Norah Cosgrove of Ottawa challenged her advisor on her investment accounts in small claims court, one of the defense statements submitted by the investment firm's lawyers was something to the effect that they felt they did not owe this 90 something year old client a duty of care.
Reading it gave me the impression that they were attempting to "wriggle" away from responsibility on this account, due to the technicality that the client had not signed over total discretion on the account. This, despite having terminated the advisor responsible and supposedly for some cause in relation to this case. Since 90% of the investment accounts in Canada would be similar to this elderly client's account, are we to infer, contrary to industry advertising and promotion, that Canada's largest and most highly trusted corporations truly feel they owe clients no duty of care? No duty to place their interests first?
Unfortunately this seems to be the case, as difficult as that sounds from an ethical standpoint. More and more investment employees are standing up to (or stepping away from) an industry that according to Bank of Canada governer David Dodge, has a worldwide reputation of being the lawless, "Wild West".
This "wriggle ability", strikes this writer as being a position that should not be supported if we were to look carefully at the promises that the industry makes to clients overall. Courts have held professional advisors to a very high standard, and often to a fiduciary standard where there is a level of trust placed in the hands of the advisor, a level of vulnerability on the part of the client, and other guidelines. In fact, when an 80 or 90 year old widow (or anyone for that matter) comes to a someone representing themselves as a professional advisor, the relationship very often immediately becomes one of total faith and trust in that advisor. It can be no other way. The client is often very uninformed as to the intracacies of investing, the advisor claims to not only be a professional, but also an expert to guide the client. Any statement to the contrary is denying the obvious. Denying the obvious is either lying, or misleading and should nto be tolerated by the largest corporations in Canada any longer.
When I was an investment person in the industry I would not accept a client who would not take my advice, much like a doctor may not accept a patient who did not follow the doctors advice. If an advisor is claiming to be a professional (and not simply a salesperson) they will do no less.The relationship often becomes very quickly one of a vulnerable, trusting soul, becoming quite reliant upon the strength, wisdom, experience and skill of the professional. If that professional then chooses to abuse the trust placed in them and put their interests ahead of that of the client, the entire system comes into question. It happens very easily of too often.That is what we are seeing in the newspapers on an almost weekly basis, and it should be telling us something is wrong and it is time for a change.
I will wrap this up here, with a promise to explain further in my next blog the topic of just how dependant and vulnerable an elderly client may become on the advisor they deal with. Written in the interests of righting wrongs. Thanks for reading along. If you like what you read, pass this site to those on your mailing list and we will change things for the better. If you don't like what you read, feel free to share your thoughts. I have been wrong before and probably will again. I welcome the chance to learn and grow.
In a recent case where Norah Cosgrove of Ottawa challenged her advisor on her investment accounts in small claims court, one of the defense statements submitted by the investment firm's lawyers was something to the effect that they felt they did not owe this 90 something year old client a duty of care.
Reading it gave me the impression that they were attempting to "wriggle" away from responsibility on this account, due to the technicality that the client had not signed over total discretion on the account. This, despite having terminated the advisor responsible and supposedly for some cause in relation to this case. Since 90% of the investment accounts in Canada would be similar to this elderly client's account, are we to infer, contrary to industry advertising and promotion, that Canada's largest and most highly trusted corporations truly feel they owe clients no duty of care? No duty to place their interests first?
Unfortunately this seems to be the case, as difficult as that sounds from an ethical standpoint. More and more investment employees are standing up to (or stepping away from) an industry that according to Bank of Canada governer David Dodge, has a worldwide reputation of being the lawless, "Wild West".
This "wriggle ability", strikes this writer as being a position that should not be supported if we were to look carefully at the promises that the industry makes to clients overall. Courts have held professional advisors to a very high standard, and often to a fiduciary standard where there is a level of trust placed in the hands of the advisor, a level of vulnerability on the part of the client, and other guidelines. In fact, when an 80 or 90 year old widow (or anyone for that matter) comes to a someone representing themselves as a professional advisor, the relationship very often immediately becomes one of total faith and trust in that advisor. It can be no other way. The client is often very uninformed as to the intracacies of investing, the advisor claims to not only be a professional, but also an expert to guide the client. Any statement to the contrary is denying the obvious. Denying the obvious is either lying, or misleading and should nto be tolerated by the largest corporations in Canada any longer.
When I was an investment person in the industry I would not accept a client who would not take my advice, much like a doctor may not accept a patient who did not follow the doctors advice. If an advisor is claiming to be a professional (and not simply a salesperson) they will do no less.The relationship often becomes very quickly one of a vulnerable, trusting soul, becoming quite reliant upon the strength, wisdom, experience and skill of the professional. If that professional then chooses to abuse the trust placed in them and put their interests ahead of that of the client, the entire system comes into question. It happens very easily of too often.That is what we are seeing in the newspapers on an almost weekly basis, and it should be telling us something is wrong and it is time for a change.
I will wrap this up here, with a promise to explain further in my next blog the topic of just how dependant and vulnerable an elderly client may become on the advisor they deal with. Written in the interests of righting wrongs. Thanks for reading along. If you like what you read, pass this site to those on your mailing list and we will change things for the better. If you don't like what you read, feel free to share your thoughts. I have been wrong before and probably will again. I welcome the chance to learn and grow.
Rules For Fools
Further on the topic of investment industry rules of two basic types. Type one are rules intended to protect investment clients from harm. Type two are rules intended to protect investment firms from harm. I contend that some investment firms do a much better job of enforcing rules that are to their own benefit, while often ignoring rules that are to client benefit. Here is but one example.
Today, march 11, 2005, the Globe and Mail contained a story titled, "RBC's Blackberry-addicted feel withdrawal pangs". It described how a "new" RBC policy, driven by regulatory requirements to overse electronic communications was causing RBC to question employees use of blackberry devices. It seems employees could send or receive e-mails without them residing on the RBC computer servers and this is a no-no.
Is it a no-no because of client interests, or due to the interests of the firm? Here is one opinion. As a nearly twenty year veteran of the firm in question, my experience has been that there has always been a rule that all outside communications by employees must be monitored. The rule was often haphazardly enforced due to new technologies making it difficult to do so. Managers of each office simply cannot read and monitor each type of letter, e-mail or correspondence coming from each salesperson to thousands of clients, so the rule is often ignored. (the rule would typically be intended to protect clients from receiving false or misleading investment promises etc)
However, now that CIBC has discovered that ignoring these types of employee communications can be detrimental to the firm, others are jumping to attention and trying to enforce a rule that they have conveniently ignored for a decade or more. Ignored due in part because it was intended as a rule to protect clients and not of particular concern to the firm's interests. Now that the interests of the firm, and not just the customer, have been demonstrated by the CIBC case, things will just have to change. Big brother will have to step in and folow this one, rather than choose to ignore it. I am adding it to the list of several dozen industry rules that are either ignored or enforced on a daily basis, depending upon the benefits or the preferences of the firm. I wont bore you with all the details. I will save the extended list for a Senate Committee on Banking and Finance.
Today, march 11, 2005, the Globe and Mail contained a story titled, "RBC's Blackberry-addicted feel withdrawal pangs". It described how a "new" RBC policy, driven by regulatory requirements to overse electronic communications was causing RBC to question employees use of blackberry devices. It seems employees could send or receive e-mails without them residing on the RBC computer servers and this is a no-no.
Is it a no-no because of client interests, or due to the interests of the firm? Here is one opinion. As a nearly twenty year veteran of the firm in question, my experience has been that there has always been a rule that all outside communications by employees must be monitored. The rule was often haphazardly enforced due to new technologies making it difficult to do so. Managers of each office simply cannot read and monitor each type of letter, e-mail or correspondence coming from each salesperson to thousands of clients, so the rule is often ignored. (the rule would typically be intended to protect clients from receiving false or misleading investment promises etc)
However, now that CIBC has discovered that ignoring these types of employee communications can be detrimental to the firm, others are jumping to attention and trying to enforce a rule that they have conveniently ignored for a decade or more. Ignored due in part because it was intended as a rule to protect clients and not of particular concern to the firm's interests. Now that the interests of the firm, and not just the customer, have been demonstrated by the CIBC case, things will just have to change. Big brother will have to step in and folow this one, rather than choose to ignore it. I am adding it to the list of several dozen industry rules that are either ignored or enforced on a daily basis, depending upon the benefits or the preferences of the firm. I wont bore you with all the details. I will save the extended list for a Senate Committee on Banking and Finance.
Subscribe to:
Posts (Atom)