I was speaking to a reporter the other day, who was valiantly trying to understand just what all the fuss was about with the ASC. He wanted to know just who is hurt if indeed the regulator is lax, lazy, or other. By way of example he said that fedderal finance minister Ralph Goodale stated the other day that he has "not had any complaints" about securities regulators or lack of regulation from Canadian consumers. If this is true, here is my answer. If not true, then no worries.
My answer is that if you are the typical "good" investment client, you might fit this profile:
--older, perhaps in your 60's, 70's or older
--wealthy, as often happens when you have lived long and worked hard
--trusting, and respecting of authority and large corporations
--vulnerable, in that you are not aware of everything, and willing to take professional advice
--you may be alone, you may even be frail or in poor health
--Certainly there are other good investment clients, but if you throw ever good client into a basket, you will tend to come out with more who fit into these kinds of categories.
So if you are able to even half way agree with the above, keep reading. If you are not, please go to www.blogspot.com and build your own story.
So we now move ahead to the scenario, where this typical, older, vulnerable, trusting, perhaps frail client has been taken advantage of by a commission salesperson, posing as a professional investment advisor at a major IDA investment firm. Trust me, it happens. Perhaps even one owned by a big five bank, as they are the largest owners of dealerships in Canada.
What does the client do? First, and most often perhaps nothing. I have seen one 90 year old widow, with a $300,000 account, say about her trusted advisor, "he is such a nice young man". While the advisor was turning over her account (without consulting her) to generate some $30,000 in commissions each year.
What do they do if they are fortunate enough to clue in or have relatives to assist them?
They ask their advisor if everything is as it should be. This is a natural first step, and it is akin to asking Michael Jackson if he is really supposed to be touching you there. The answers will tend to support, or reassure the client that all is well, perhaps explain that markets are down, and there is nothing that can be done. I have even see some ego driven advisors get angry at elderly clients, and yell at them for mistrusting them, or questioning them.
This would constitute verbal abuse piled on top of financial abuse toward the elderly.
If the client has the energy, courage, and emotional strength to put up with more of that, they may be encouraged to write to the office manager, or to the firm in question. I have seen a few responses to letters like this, and they are not encouraging. Supposedly a company compliance officer looks at matters such as this, but I am not convinced they are not more interested in protecting the firm at all cost instead of protecting the client. I could be jaded on this, so ask a few opinions within the industry before you accept this opinion as true. End result in my experience is that the client is "handled", with letters minimizing, explaining away or brushing off the concern. The very last thing they will ever put in writing is that they agree and admit that the client was done wrong. That would be like asking Michael Jackson's lawyers to admit their client did something wrong.
So we now have taken up to a year or more out of an elderly persons life, trying to get straight answers on their life savings, and how it was handled.
If they have some real bench strength (support) in the family, they may get help and write a letter to the Provincial Securities Commission making their concerns or complaints known. Here they will meet with two beaurocratic (how the hell do you spell that?) obstacles rather than find help. Obstacle number one is that the commissions are so understaffed (and allegedly dysfunctional employers, .............but I digress) that they can only investigate cases "of importance". This means a yes to a few cases where they score media points (like a large or popular case for example), and "NO" to mom and pop investor cases. They will not tell you this however (misleading advertising), but will instead refer you to the Investment Dealers Association (IDA) , whom they claim do all the investigations for IDA registered firms. Never mind that the IDA is not powered by any law that allows them to do this, nor are they impartial. They are called the Investment Dealers Association because they represent and are paid by the Investment Dealers.
You can imagine the kind of response the client will now get to her concern or compalint...........if she is not dead or exhausted by the whole affair by this time.
So, a frail, trusting, vulnerable, elderly person, who may have been victum of a financial predator has spoken or written to four to six different people, departments, or organizations at this time, each one of which gave her a promise that they are, "there to protect or serve her interests". Each one has either ignored her, abused her further, or told her to go somewhere else, (without being honest enough to tell her that her status is "not important" enough to warrant the same treatment as other cases).
Just noticed, I took to giving this ficticious client a female gender. I should explain. In addition to living longer than males, females listen and accept advice from professionals better than males do (ever seen a guy ask for directions?) and thus in my story about the "ideal" client,and it is my story, my version of an ideal client is female in addition to the points above.
Where was I? Oh, so now this poor client has gotten the "runnaround" by almost each and every avenue they can think of (barring legal action, and when did you last meet a senior citizen that wanted to start a court case in their declining years?) and this includes government agencies, self regulatory agencies, and the largest and most trustworthy (advertising promise) banks in the country. I would not, do not, could not expect them to continue on. To continue to emotionally drain themselves fighting against what feels like an "entire industry", in denial that there is a problem.
To get to the punch line.............how are these people expected to continue on, and write another letter to ralph goodale, or ralph klien or ralph anyone. (and I am a huge fan of ralph klien, by the way) We already know the type of answer they would get. "thank you for your correspondence, I have passed your concern to the proper department and I can assure you...............blah, blah, blah"
If anything happens at all, their complaint may get handed back to the dysfunctional or incapable government regulator who has already dismissed it once.
I give up. And so do clients. And that Ralph, is why you are not getting flooded with letters from abused investors. Please consider this when (if) you say you dont think there are many abused investors.
Thanks to all the Ralphs out there who need to listen.
