What they DON’T tell you about the investment marketplace – part 2
Welcome to Part II of this article series about understanding how the function investment marketplace functions in Canada. If you missed Part I then be sure to go back and read it before continuing – it will make more sense that way.
But to quickly recap Part I: the regulated investment marketplace is structured in such a way that investors are only able to access investment opportunities from either mutual funds, stocks and bonds, private equity, syndicated mortgage investment products, and segregated fund investment products. Due to government regulations, investors are not able to access any real-estate investment opportunities, largely because it is not in the interest of big banks who make a profit off your investments in the regulated marketplace.
I used the analogy of a shopping mall, where on the left-hand side sits the regulated marketplace (depicted as 5 stores: store #1 sells mutual funds, store #2 sells stocks and bonds, store #3 sells private equity, store #4 sells syndicated mortgage investment products, and store #5 sells segregated fund investment products). On the right-hand side of the mall sits one large store personifying the unregulated investment marketplace – real estate-related investment opportunities.
Okay, let’s jump straight back into it.
How does the OSC and FSCO/FSRA actually ‘trap’ investors?
The OSC and FSCO/FSRA trap investors through the financial advisor licensing system, which the OSC and FSCO/FSRA control. Each of the 5 stores on the left-hand side of the mall require separate and different investment licenses. When a person wishes to work in the investment industry as a financial advisor, they will normally enter the investment industry by getting a ‘license’ and working as a financial planner and/or investment advisor for an investment company (CIBC, Edward Jones, TD, Investors Group, RBC, Money Concepts, etc.).
If an advisor wants to work in store #1, they need to obtain an MFDA license. To work in store #2 they will require an IIROC license. Store #3 requires a Private Equity license, and store # 4 requires a Mortgage license, while Store #5 requires an Insurance license. Once an advisor gets any of these 5 licenses, they are now stuck in one of the 5 stores on the left-hand side of the indoor mall.
How does this affect me, the innocent investor?
When an investor like you works with a ‘licensed’ financial advisor, it means that they have you ‘trapped’ into one of the 5 stores on the left-hand side of the indoor mall. The unsuspecting investor assumes that their licensed advisor is acting in their best interests but this is impossible for the advisor to do. An investor would think that the fiduciary responsibility of the financial advisor is to them, the client, but unfortunately, this is not the case. In fact, the regulatory system actually prevents the licensed advisor from putting the best interests of their client first.
Given the way the investment industry is structured, the advisor must put the best interests of the company that licenses them ahead of their client’s best interests. This is a sad fact which I find to be unbelievable, but unfortunately, it is very true. The regulatory system, created by the banks and large investment companies, require the advisor to ‘trap’ their unsuspecting client into one of the 5 stores on the left-hand side of the indoor mall and, as such, the licensed advisor can only sell the investment products found in that store. Thus, the client (you) becomes trapped.
When investors figure this out, thanks to the help of Canadian Investment Services, they get angry and naturally feel duped. We tell them not to blame their advisors given it is not their advisors’ fault. The fault lies with the regulatory and licensing structure within the investment marketplace, which has been created by the big banks and large investment companies to help them control the financial assets invested in the overall investment marketplace.
The banks and trust companies do not want you to know this, and they certainly do not want you knowing about the Real Estate store on the right-hand side of the mall. Why? Because if investors learn about the Real Estate store they will move their assets there and away from the banks and investment companies. It’s very sad to say but today’s licensed advisors are really glorified salespeople for the companies that license them.
So what is the solution? How does an investor get out of the trap?
To avoid being trapped, the solution is to work with an investment services company that is not restricted by an investment license, which is exactly how Candian Investment Services operates.
The easy way to find out if you are actually trapped is to ask your financial advisor which license they hold. If they hold an MFDA license, you are trapped in Store #1, if they hold an IIROC license, you are trapped in Store #2, if they hold a Private Equity license, you are trapped in Store #3, if they hold a Mortgage license, you are trapped in Store #4, and if they hold an Insurance license, you are trapped in Store #5. There are no if’s and but’s.
How can Canadian Investment Services help you?
Canadian Investment Services is not tied to any investment license, nor do we want to be. Therefore, we have no fiduciary responsibility to any bank or investment company – or any other company that creates investment products for that matter. We can proudly say that our fiduciary responsibility is to our clients.
We help our clients navigate the overall investment marketplace, and if we want any investment products from stores #1, #2, and #3, or mortgages and/or insurance from stores #4 and #5, then we just simply use the services of a licensed representative to access that product. Also, by not being tied to an investment license, we have access to the investment products that are found in the Real Estate store on the right-hand side of the mall, many of which we create internally ourselves (such as Real Estate Fix ‘n Flip projects).
Think of it this way: try to avoid going into The Investment Marketplace mall by yourself, you’ll just end up trapped in one of the 5 stores on the left-hand side. Alternatively, let Canadian Investment Services navigate you through the mall, and that way you’ll be able to access all of the investment products available on both sides of the aisle. In addition, we will provide you with the unbiased investment advice and financial planning information that you deserve. With our help, you’ll end up being invested in investment products that you actually want to be invested in, either from stores 1 through to 5 and/or from the Real Estate store.
How much does it cost to use Canadian Investment Services?
The short answer: nothing! That’s right, our service is free. Here’s why:
We deal with all your needs before you enter the Investment Marketplace mall by providing you with all the required education and information required for you to make an informed decision as to the direction you want your financial investment to take. We do this because when we enter the investment mall together you are much better equipped to determine which store to go into.
We help you determine which investment products and financial services you require and then we go into the store and purchase those products from a licensed advisor (the licensed advisor will then pay Canadian Investment Services a portion of the commission they have earned, and that’s how we get paid). That’s why our service to our clients is completely free. Given you deal directly with a licensed advisor, you would have had to pay the same amount of commission anyway. So what’s the difference? There is no added cost to you.
Canadian Investment Services provides you with solid, unbiased financial information, whereas licensed advisors are just trying to sell you what they are licensed to sell.
Ready to go shopping at the investment mall with us?
Visit www.canadianinvestmentservices.com to learn how we can help broaden your access to diverse investment opportunities.
This concludes Part II of this article topic. I hope you have found this information useful. I look forward to helping you structure and plan your financial future.
Until then, take care.
Gerry J. Hogenhout
Founding Principle, Canadian Investment Services
Edit: On The Run Agency