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It's Your Money!

01 Feb 2015 7:28 PM | Anonymous

It’s your Money

By Joe Batty

I have been quoted as saying:

most people spend more time mowing their lawns than they do managing their portfolio”.

I must have uttered this in a discussion when I was talking about how grossly complex the worlds of finance, banking, investing, and income tax, etc. have become.

As a Chartered Accountant, when I bought my first copy of the Income Tax Act, I think it cost $20 and was about 300 pages. That same document today, is now over 1,000 pages.

Finance, banking and investing have become equally daunting.

Is it any wonder that people (in droves) have yielded their decisions about their money to the new army of “investment advisors” that populate our financial institutions? Sadly, there is an overwhelming sense of helplessness that permeates through our society, when it comes to money matters. Sadly, as well, there is a mountain of evidence that suggests our many financial institutions not only know this sense of helplessness exists, but actively engender it and then prey upon it to their advantage.

So what are some basic facts that you should know and use when you manage your money?

First and foremost, it is your money (not the Banks’/Brokerage Firms’, etc.) so you have a 100% right, to control where your money is placed.

Do not let the Bank/Brokerage Firm, etc. bully or intimidate you into believing that once you write them a cheque or transfer your money that they now decide where to place your money. These institutions all have impressive questionnaires and sets of tidy, neat forms (that seem logical) to delineate your level of sophistication and your agreed level of risk to which you are willing to expose your investments. Once they get you to sign them, they not only take control but also absolve themselves of any responsibility if you lose some (or all) of your money.

It’s your money; you should be the one deciding what is done with it.

Author’s Note:

A couple I know received some very bad investment advice; they lost over 1/3rdof their life savings (several hundred thousand dollars). After they decided to challenge their financial institution, and seek redress and compensation, they asked me to help with their potential claim. I reviewed the letters they had written and the replies they received. They had been denied at the first level and were referred to the financial ombudsman. This review was also denied. The basis for the denial of the claims, were that they had signed the questionnaire and the forms (which purportedly indicated their level of investing sophistication) and based upon the answers they had provided, they were fully capable of understanding the recommendations and advice given.

After I intervened them and asked about their perception of the questionnaire and the forms, they admitted to me they had signed these documents in “good faith” and really did not fully grasp the magnitude of what they were signing.

Second, after you have agonized over how to maximize the performance of your assets and decided you should take some money from your savings account, or the sale of your home, etc. and actually place it into some kind of 3rd party investment, you need to know there are 3 additional decisions to make.

When people walk into the offices of the Bank/Brokerage Firm, etc. and commence discussions with an “investment advisor”, many people quickly become intimidated by the complexity of the discussion. At this point, the majority of Investors yield their decisions to the person across the desk from them (even though they may not know this person from Adam). The whole ambiance of the building, the institution and the “I am your Advisor and know what is best for you”, combine to create a totally false sense of security and trust, even though in most cases, people know there are mountains of evidence that belie this trust.

Thinking back to my own school days the 3 R’s were the key (reading, writing & ‘rithmatic). I was quite good at math (‘rithmatic) and I am sure that most of our audience are also, at the very least, reasonable at math. What makes me wonder is why most of us become intimidated when we put a $ (dollar sign) in front of the numbers?

Getting back to the 3 additional decisions you need to make when you hand over your money. Here they are:

  1. Do you want to put your money into a registered account?

This means a TFSA (Tax Free Savings Account) or a RRSP (Registered Retirement Savings Plan) or a RESP (Registered Education Savings Plan) etc. These accounts have been established by the Government as part of our Income Tax Act and must be administered by a licensed institution (Bank/Brokerage Firm, Trust Company etc.) that reports the status of your account to the Canada Revenue Agency.

You don’t have to utilize a registered account, but if you don't, there could be Income Tax issues (both good and bad) now, and in the future.

  1. What specific investments do I want to place my money into?

There are a multitude of options available for you to choose from. This is where the complexity starts. If you have not done some pre-meeting homework, you may be overwhelmed by the terms such as “diversify”, “risk”, “yield”, “r.o.i.”, “dividend”, “share”, “debenture”, “bond”, “emerging markets”, “eligibility”, etc.

Do you need to know all of this? …….. No!

If you have done some pre-meeting homework you will adopt the K.I.S.S. principle (Keep It Simple - Silly).

Most of these terms are used exclusively by large, very sophisticated Investors like pension funds. Unless you are investing millions, you only need to know some ABC’s (the basics).

  1. Should I designate my investment activities as “self-administered”?

This means you decide what kind of investments you want to make and the Bank/Brokerage Firm, Trust Company etc., simply does the paper-work (for which they charge a fee).

Most Bank/Brokerage Firms, etc. do not want you to designate yourself as “self-administered” because the transactions that you will choose, will probably benefit you more thanthe Bank/Brokerage Firm, etc. This invariably means that the institutions will not earn as much in fees from the transactions as they would if you bought their pre-canned products. So, typically they will not only avoid telling you about this option, but completely poo-poo it, should you ask.

Designating your investment activities as self-administered is as easy as filling out one form and signing it.

Perhaps someone should be developing a new “app” for your phone, or a computer game specifically designed to train people about money.

The naysayers of course would suggest that there is lots of information available right now. That may be true; however, most of this info has been prepared by the very institutions that are the root cause of the problem and the beneficiaries of the status quo. Additionally, whatever data is available, is extremely biased towards institutional investment or is in a form that adds to the confusion (ever read the Canada Revenue Agency’s material?)

Just sayin’.

Joe Batty


It’s your Money

By Joe Batty

I have been quoted as saying:

most people spend more time mowing their lawns than they do managing their portfolio”.

I must have uttered this in a discussion when I was talking about how grossly complex the worlds of finance, banking, investing, and income tax, etc. have become.

As a Chartered Accountant, when I bought my first copy of the Income Tax Act, I think it cost $20 and was about 300 pages. That same document today, is now over 1,000 pages.

Finance, banking and investing have become equally daunting.

Is it any wonder that people (in droves) have yielded their decisions about their money to the new army of “investment advisors” that populate our financial institutions? Sadly, there is an overwhelming sense of helplessness that permeates through our society, when it comes to money matters. Sadly, as well, there is a mountain of evidence that suggests our many financial institutions not only know this sense of helplessness exists, but actively engender it and then prey upon it to their advantage.

So what are some basic facts that you should know and use when you manage your money?

First and foremost, it is your money (not the Banks’/Brokerage Firms’, etc.) so you have a 100% right, to control where your money is placed.

Do not let the Bank/Brokerage Firm, etc. bully or intimidate you into believing that once you write them a cheque or transfer your money that they now decide where to place your money. These institutions all have impressive questionnaires and sets of tidy, neat forms (that seem logical) to delineate your level of sophistication and your agreed level of risk to which you are willing to expose your investments. Once they get you to sign them, they not only take control but also absolve themselves of any responsibility if you lose some (or all) of your money.

It’s your money; you should be the one deciding what is done with it.

Author’s Note:

A couple I know received some very bad investment advice; they lost over 1/3rd of their life savings (several hundred thousand dollars). After they decided to challenge their financial institution, and seek redress and compensation, they asked me to help with their potential claim. I reviewed the letters they had written and the replies they received. They had been denied at the first level and were referred to the financial ombudsman. This review was also denied. The basis for the denial of the claims, were that they had signed the questionnaire and the forms (which purportedly indicated their level of investing sophistication) and based upon the answers they had provided, they were fully capable of understanding the recommendations and advice given.

After I intervened them and asked about their perception of the questionnaire and the forms, they admitted to me they had signed these documents in “good faith” and really did not fully grasp the magnitude of what they were signing.

Second, after you have agonized over how to maximize the performance of your assets and decided you should take some money from your savings account, or the sale of your home, etc. and actually place it into some kind of 3rd party investment, you need to know there are 3 additional decisions to make.

When people walk into the offices of the Bank/Brokerage Firm, etc. and commence discussions with an “investment advisor”, many people quickly become intimidated by the complexity of the discussion. At this point, the majority of Investors yield their decisions to the person across the desk from them (even though they may not know this person from Adam). The whole ambiance of the building, the institution and the “I am your Advisor and know what is best for you”, combine to create a totally false sense of security and trust, even though in most cases, people know there are mountains of evidence that belie this trust.

Thinking back to my own school days the 3 R’s were the key (reading, writing & ‘rithmatic). I was quite good at math (‘rithmatic) and I am sure that most of our audience are also, at the very least, reasonable at math. What makes me wonder is why most of us become intimidated when we put a $ (dollar sign) in front of the numbers?

Getting back to the 3 additional decisions you need to make when you hand over your money. Here they are:

  1. Do you want to put your money into a registered account?

This means a TFSA (Tax Free Savings Account) or a RRSP (Registered Retirement Savings Plan) or a RESP (Registered Education Savings Plan) etc. These accounts have been established by the Government as part of our Income Tax Act and must be administered by a licensed institution (Bank/Brokerage Firm, Trust Company etc.) that reports the status of your account to the Canada Revenue Agency.

You don’t have to utilize a registered account, but if you don't, there could be Income Tax issues (both good and bad) now, and in the future.

  1. What specific investments do I want to place my money into?

There are a multitude of options available for you to choose from. This is where the complexity starts. If you have not done some pre-meeting homework, you may be overwhelmed by the terms such as “diversify”, “risk”, “yield”, “r.o.i.”, “dividend”, “share”, “debenture”, “bond”, “emerging markets”, “eligibility”, etc.

Do you need to know all of this? …….. No!

If you have done some pre-meeting homework you will adopt the K.I.S.S. principle (Keep It Simple - Silly).

Most of these terms are used exclusively by large, very sophisticated Investors like pension funds. Unless you are investing millions, you only need to know some ABC’s (the basics).

  1. Should I designate my investment activities as “self-administered”?

This means you decide what kind of investments you want to make and the Bank/Brokerage Firm, Trust Company etc., simply does the paper-work (for which they charge a fee).

Most Bank/Brokerage Firms, etc. do not want you to designate yourself as “self-administered” because the transactions that you will choose, will probably benefit you more than the Bank/Brokerage Firm, etc. This invariably means that the institutions will not earn as much in fees from the transactions as they would if you bought their pre-canned products. So, typically they will not only avoid telling you about this option, but completely poo-poo it, should you ask.

Designating your investment activities as self-administered is as easy as filling out one form and signing it.

I think this might be advantageous to put into the education curriculum and make it a mandatory requirement for graduating. What do you think?

In the meanwhile, for the masses of people unable to benefit from such an initiative (because they are already out of school), perhaps someone should be developing a new “app” for your phone, or a computer game specifically designed to educate people about managing their money.

The naysayers of course will suggest that there is lots of information available right now. That may be true; however, most of this info has been prepared by the very institutions that are the root cause of the problem and the beneficiaries of the status quo. Additionally, whatever data is available, is extremely biased towards institutional investment or is in a form that adds to the confusion (ever read the Canada Revenue Agency’s material?)

Just sayin’.

Joe Batty

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