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Our Mission
This web site is dedicated to mutual fund investor education and protection.
The $600 billion mutual fund industry plays a key role in the savings and retirement plans of millions of Canadians. Many industry practices provide beartraps for the unsuspecting investor and securities regulations have not kept up with the pace of change in the industry. Financial literacy education in Canada has also dramatically lagged the increasing sophistication of financial products especially mutual funds. Increasing numbers of investors have expressed bitter disappointment with the returns obtained and the way they are communicated with. Smarter mutual fund investing and better financial performance is our goal. We welcome any comments.
Mutual Funds are Sold not Bought
Ken Kivenko P.Eng.
Investor Advocate
kenkiv@sympatico.ca |
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While mutual funds help reduce issuer –specific risk through diversification, they introduce a plethora of new threats to satisfactory returns that are inherent in their legal / tax structure, fees/commissions and industry sales practices. These threats are not articulated in the fund prospectus. Subtle hazards specific to the fund include “soft “ dollars (brokerage business given to brokers in exchange for research but sometimes for other goodies-there’s a reason the word soft is used), and the hazards of style drift (consciously deviating from the fund’s stated investment policies, risk profile and objectives to boost returns).
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Over 10 million Canadians make investments in stocks, bonds, GIC’s and mutual funds. It’s a BIG business and highly profitable for the banks, fund companies, dealers and brokers. Mutual funds alone collect over $10 billion in fees each year. -the sales are commission based and include embedded sales commissions. When financially unsophisticated investors meet commission or quota- driven advisers, a toxic mixture can be created. So, it's not unnatural that problems will develop due to incompetence, greed, misrepresentation, or even administrative errors. This is where an effective investor complaint process can help you recover undue financial losses. A “Complaint” is defined to include any written or verbal statement of grievance from a client or any person acting on their behalf, former client or prospective client, alleging a grievance involving a firm or representative of a firm.
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While the Chairmen of provincial securities regulators publicize their wonderful contributions to regulation, investors suffered badly. Billions of dollars were lost to unsuitable investments, excessive fees and leveraging, misleading marketing, fraudulent funds and crooked advisers and brokers. Here’s a small sampling of the rattraps retail investors had to endure in 2008.
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“This latest financial crisis [ ABCP] should serve as a wake up call for Government to finally take action on reforming the regulatory system and providing investor protection that isn't dependent upon self regulation and the charity of an industry that has a history of creating structured investment vehicles that can't be understood by ordinary investors, and exemption orders to allow regulations to be ignored” –Stan Buell, President, Small Investor Protection Association, www.sipa.ca
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This Guide has one purpose: To assist your efforts at obtaining a restitution recommendation from OBSI.
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INVESTMENT FUNDS IN CANADA AND CONSUMER PROTECTION
STRATEGIES FOR THE MILLENNIUM
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“.. Mr. Diekmeyer, 73, says he lost $800,000 - his life's savings - when Bre-X collapsed. He also saw his personal friend and stock broker kill himself in 1997, riddled with guilt about his clients' losses."I survived with great difficulty and a friend of mine committed suicide over it," says Mr. Diekmeyer, who lives in a modest apartment in Beaconsfield, west of Montreal. "I only know this story. I'm fairly certain there are others that are equally disastrous…"
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One of the big issues among
mutual fund investors is that they tend to only look at returns,
particularly short-term returns, when approached by their adviser. Risk
considerations are way in the background until the losses pour in some
time later. During the tech boom some investors held 80-90 % of their
portfolio in “exciting” telecom, Internet and advanced science and
technology funds. In 2001-2002 they plummeted and have not recovered to
this day. A number of funds were shut down or merged out of existence.
BUT the losses didn’t disappear for the hapless investors who were
persuaded to buy them.
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Fed up with dealing with the
salesperson who can only sell you mutual funds? Want to get away from
high MER’s? Concerned about the mutual fund trading abuse scandals?
Want more flexibility on when you can buy or sell units? Do you like
the idea of limit orders and stop loss orders? Feel comfortable with
making investments on your own? Looking for a different asset class?
Exchange traded closed- end funds (CEF’s) may have a role to play in
your portfolio.
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The basic idea of a dividend fund
is to invest in blue-chip companies’ common or preferred shares that
pay a steady flow of increasing tax -advantaged dividends. Holdings
typically include the common stock of banks, pipelines, power utilities
and insurance companies. According to the 2001 TSE yearend report only
57 Canadian stocks paid dividends non-stop for the past 25 years versus
100 companies 25 years ago.
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