“You throw the first punch, we will drop the gloves. Oh yeah.”

Drop the gloves-3
You throw the first punch, we will drop the gloves.


I remember a series of Tim Horton’s TV ads about welcoming people to Canada which tried to portray Canadians as, yes, polite, but with a certain unshakable pride, one of them saying something like “If you throw the first punch, we will drop the gloves. Oh yeah.”  We’re nice but by no means push-overs. I’m not sure I’m totally on board with a doughnut company standing up for me on the playground but the theme certainly strikes a chord.  Canadians have a reputation for being polite and I’m not sure we like it.  Let me try to stoke some of that pride, Chalten style.

Many (is most too inflammatory? Sorry, I don’t mean to be rude) Canadians get their financial advice from an individual or institution that is compensated only by selling them a financial product or trading their account.  Whether that be discretionary portfolio management, mutual fund investments, life insurance or some combination (combinations like investments and insurance are generally preferable from an advisor’s perspective because the fees are more generous and less transparent)  we believe the conflict of interest inherent in this type of relationship is understated.  Conflicts as well as high and hidden fees (Troubles # 2 and #5 respectively in our list of investing Troubles to avoid)  can have a significant financial impact for investors.  We quantified the impact of fees in a recent post (see What would you do with an extra $250,000?).  One would expect the amounts at stake to be motivation enough to push people to at least inquire what fees they are paying let alone seek to make meaningful changes to the way their investments are managed.  A 2013 Environics study reported that almost half of Canadians who say they use an advisor think they either don’t pay their advisor or don’t know how or how much they pay.

If the dollars and cents aren’t making it happen, perhaps there are other motivations/emotions at play here?  Moving back to Canada after being abroad for many years, it was nice to experience the politeness of Canadians in everyday life situations, whether at the grocery store, saying hello on the sea wall, waiting in line for the library, whatever.  However, last week we were delivering an educational session we have developed called the “Where, What and How of Investing” that seeks to inform on some basic but important issues when it comes to investing.  The idea is that if you better understand the where, what and how you’ll make better investment decisions for you and your family and are less likely to be taken advantage of by those who don’t have your best interest at heart.  Specifically, we were having a discussion about high mutual fund fees and their potential impact on investor returns and we implored our audience to just ask the question, “How and how much am I paying you for financial advice and investments?” to their advisor or financial institution.  A comment came back at us – “It seems a bit rude to ask.”

It is not rude to ask.  For some people, fees paid for investment /insurance products might be among the highest annual household expenditures next to their mortgage payment and they don’t even know how or how much they’re paying.  These fees represent a direct transfer of wealth from your bank account to your financial institution or advisor arguably without an adequate transfer of value for money back to you (sorry, “arguably” is also being too polite).  It is not rude to ask.  You owe it to you and your family to ask.

So many punches have been thrown at Canadian investors, most by our own fellow Canadians and our financial institutions.  It’s well past time to throw off the gloves, shed our politeness, take pride and fight back.