Thursday, June 25, 2015
This article outlines the risks involved in appointing your investment advisor as your executor. Right now regulators do not perrmit this but the IIROC Board is considering allowing it subject to some conditions. Read the article
Fiduciary Standard and Financial Advice: Findings from Academic Literature
Abstract: This article provides an overview of theory and empirical evidence related to the benefits and costs resulting from the application of a fiduciary standard of care to the conduct of brokers, dealers (broker-dealers), and investment advisors. The purpose of this document is not to advocate a position on possible regulatory actions. It is intended to provide an in-depth review of the extant literature, primarily from economics, finance, and law, related to the regulation, incentives, and outcomes of the existing advice marketplace. Opinions on the likely impact of various strategies on the marketplace are entirely those of the author and are based on the preponderance of empirical evidence and the strength of related theories. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2419727
Wednesday, June 17, 2015
Dealer / advisor conflicts-of-interest are top of mind for regulators and investor advocates.Conflicted advice can skew recommendations that are not in the best interests of investors , thereby impairing savings and retirement accounts. The CSA commissioned third party research into the impact of advisor compensation on advisor recommendations.The Researcher was to conduct a literature review to evaluate the extent, if any, to which the use of fee-based vs. commission based compensation changes the nature of advice and investment outcomes over the long term. Following a competitive procurement by the CSA, the Brondesbury Group was contracted to conduct this research. The Brondesbury Group has now completed their work and their findings are set out in the Mutual Fund Fees Research report which is the basis for our commentary. The report concluded that there is sufficient evidence of skewing to consider regulatory reforms.Indirectly, the report also points to the need for the standard of advice giving to be examined since a change in compensation model alone cannot satisfactorily resolve the core issue.Read our Commentary on the Report which is made from the perspective of the retail investor.
Tuesday, June 16, 2015
If you have a complaint with a a Bank-owned IIROC investment dealer you may find yourself getting an offer to make use of the Bank's internal "Ombudsman" if you didn't accept the dealer's restitution offer ( if any). This INVESTOR ALERT tells you that the use of this " Ombudsman" is entirely voluntary and warns of the risks involved . You may want to use the Ombudsman for Banking Services and Investments, a free, independent Dispute Resolution Service.
Saturday, June 6, 2015
Responsible Investing (RI) aka Socially Responsible Investing (SRI) incorporates environmental, social and corporate governance criteria into the selection of investments.For some, these constraints mean that portfolio construction is limited, opportunities lost and risk increased.But a May , 2015 study suggests that RI provides a number of potential advantages including strong financial returns,reduced risk , and more downside protection than traditional mutual fund incvestments.RI mutual funds and venture capital funds now total $17.5 billion . The paper Canadian Responsible Investment mutual funds : Risk?Return Characteristics Study Findings can be read here It should be noted that not everyone agrees with the screening criteria. For example, those who survived the horrors of WWII do not necesarrily agree that investments in weapons manufaxturers like Lockheed Martin are necessarily undesirable. To them , it means the ability to defend our democracy and freedom .