Parasite

This post is for my fellow advisors/planners, lawyers, accountants, realtors, and mortgage brokers. But just the good ones.

I’m lucky that I don’t have to cold call anymore, and that’s because I quite often receive introductions to people who need financial advice or guidance. The introductions mostly come from existing clients, former clients, lawyers, or accountants.

After a few meetings, I can usually provide actionable, immediate advice along with a longer-term plan to get a potential new client on the right path. Some want to work with us, others take it and run with it themselves, or at least try to.

Every so often, though, after an introduction, a person will say, “No thanks. All financial advisors/planners are parasites.” And that’s before even speaking with me on the phone. When I used to cold call (there’s a reason I mentioned it earlier) I would hear it all the time. The name calling was much worse, though.

Let’s get three things out of the way right now.

First, good advisors/planners, lawyers, accountants, realtors, and mortgage brokers are not parasites. They create a considerable amount of value. It’s just a matter of finding the good ones.

Second, there are bad actors in every single occupation. They call them quacks in medicine, shills or sharks in real estate, shysters or ambulance chasers in law, cowboys in construction, demagogues and grifters in politics, hacks in comedy, and, my personal favourite, charlatans in financial content creation.

Third, when people think all individuals in a specific profession are quacks, hacks, or grifters it’s usually because that person either had a bad experience with a legitimately bad actor, or they had an OK experience with a good actor who didn’t do a good enough job explaining the advice they provided.

So how do you avoid bad actors or poorly delivered advice so that you don’t have to call me a parasite in the future? I can’t comment on the other professions because I don’t know enough about them (though I can usually spot bad accounting and legal advice), so here’s my guidance for wealth management.

Bad Actors

A list is appropriate here. These are the signs that you might be working with a bad actor.

• You have a commission-based account, and the person calls you regularly to sell X and buy Y. Then a month later, they call to sell Y and buy Z. Then a month later, they call to sell Z and buy X again. It’s called churning. They win. You lose.
• They won’t stop suggesting you buy a universal life insurance policy because it’s a good investment. It isn’t.
• They tell you they “can provide equity-like returns with less risk than equities.” This isn’t possible.
• Whatever they’re promoting has a hard deadline or that you must act with urgency, or else. December 31^st, the RSP deadline, and April 30^th are the only true deadlines in personal finance
• They tell you the end of the world is coming but their investment process will somehow save your and your family’s life. A $50/m subscription to an investment newsletter won’t save your life during the apocalypse.

I could keep going, but I think those five items are the hallmarks of bad actors. Bad actors are much easier to spot than good actors who deliver their advice poorly.

Good Advice Delivered Poorly

There’s a reason I never stop writing about the next market crash. We know it’s coming. We just don’t know when. I believe that to be a successful investor—and to put your future-self in the best possible position—your long-term investments should be allocated entirely to equities.

Equity investing sounds amazing. “If history is any indication, your money could double every seven to ten years. That means 100,000 turns to 200,000, 200,000 to 400,000, 400,000 to 800,000…” The next part gets missed sometimes. “But every four or five years your investments will probably get hammered. And we’re talking about a potential drop of greater than a 50%.”

It’s that second part that is so important. I’ve seen countless former investors who are now allocated 100% to GICs because they couldn’t endure the likes of the Tech Crash, or the Great Financial Crisis, or the Pandemic Plunge. I don’t put that on them. I put that on the person who was giving them advice at the time. And when I meet them, they tell me they don’t trust advisors. I can’t blame them.

There’s also a reason I keep bringing up the TFSA versus RRSP debate. Too often I hear “I wish I had never contributed to my RSP. I’m going to have to pay tax later. I can’t believe some advisor at the bank recommended I fund it. I should have only used a TFSA.” This sometimes comes from investors who started saving before the TFSA was even introduced. The RRSP was the only option.

How else would you have tax sheltered your money? What about the tax savings for each contribution? What did you do with that money? Again, that misinterpretation is on the person who gave the advice.

Then there’s the yes people. “Hey, I read online that I should buy XYZ.” “OK. Let’s buy some XYZ in your account.” “Well, aren’t you going to look into it a bit or research it a bit?”

If you’re working with an advisor (i.e., if you are paying someone) but you’re telling that advisor exactly what you want them to do with your money, and they take your instruction without any pushback ever, then what are you paying for? In time, you’ll think “Wow. I paid that person a lot of money to do nothing.”

Good advice can be articulated on a napkin. If you don’t understand, keep asking. If you still don’t understand, leave.

But good advice delivered poorly doesn’t mean the professional is a parasite. It means they didn’t do their job well enough, the client didn’t understand well enough, emotion got involved (taxes and market crashes always lead to emotional fury), or a combination of all three.

There are bad actors everywhere. It’s natural. Unfortunately, professions requiring the most trust often attract some of the worst people. There’s a reason wealth management has a bad track record globally (and in Victoria). Thankfully, more and more bad actors get called out sooner. That’s one area I’ll tip my hat to finance writers. Go ahead and call parasites parasites. But don’t call me one. It hurts my feelings.