A Money Coach in Canada

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2259265239_0587c19e8e_m.jpgYou can just imagine the conversation. The approaching-retirement couple are assured by the financial planner/banker that, even if the worst case scenario occured – the mortgages (surely one of the most secure investments) went into default – the investment was still backed by the property. So yes, it is a conservative investment.

It sounds good to the couple (it would sound good to me!) so they hand over most of their nest egg and the funds are then lent out ultimately to people who don’t have the best credit, but want to buy a home.

Everyone wins. The people who need a mortage but don’t qualify through the usual lenders get a home. The investors make a reasonable rate of return, with the property to back it up. It’s all good.

Except the worst case scenario indeed happens. Over and over again. And next thing you know you’ve lost a massive part of your life savings.

Now what? Who pays?

According to the globe and mail, Canadian banks have agreed to lend billions of dollars in a plan to staunch the blood, in exchange for a legal bill that disallows any lawsuits against them.

Last week, Canaccord Capital made an offer to its investors to buy back their investments at par, to prevent a lawsuit. Watch for a similar offer from Credential Securities this week.

Readers: what is your opinion? At the end of the day, is this an investment risk like any other? Should the investors bear the brunt, and the responsibility, of this debacle? Or should they be allowed to sue the banks and institutions that sold them the product?

About the Author

Imagine if Canadians were known for being all over their money. Engaged. Proactive. Getting out of debt. Savvy. Saving. Generous. Nancy wants to help. Nancy started her own journey with money over 15 years ago, and formed her company “Your Money by Design” in 2004 to help others along the same path. It’s not the usual financial advising/investment stuff. It’s about taking control of day-to-day finances –managing monthly cashflow effectively, spending appropriately, getting out of debt, saving. If you're ready to take control over your finances, pop by her business site, YourMoneybyDesign.com


  1. Yes it’s an investment like any other.

    What’s with this magic belief that housing and mortgages are risk-free, that house prices always go up, etc.? I for one hope that housing prices crash and burn. Then maybe someone can convince me to buy real estate. Certainly not at these prices.

    “Buy land, they’re not making any more of it”. Anyone knows that’s not true (if by “land” we mean parcels of land ready for a new house); it’s evident at the edge of every growing city.

    OK, that’s the end of my housing rant for today. 🙂


    Apr 15, 2008
  2. Angela

    Since I work at a bank and am working towards in becoming a financial planner, I might be bias.

    I think getting a financial planner belongs to one of those ‘buyer beware” category. I’m fortunate in having an ethical financial planner as my mentor. However, there are many who are not. Those who are ethical would take time to explain to the clients about risks. Those who are not would not offer the best advices.

    If you have a reason to believe that your financial planner is unethical and then you lose money as a result, you could make you complaints heard at places like the Investment Dealers Association.

    But I think the best way for the investors to protect their fortune is to be knowledgeable about what their financial planners are trying to do and to sell. Planners are not “Gods” — they can’t make you rich. And if the planners are trying to make you do something you feel uncomfortable, take your money and leave.

    So, I think the investors should bear the brunt if they don’t check out their financial planners; they should bear the brunt if they don’t take interest in what they have bought in their portfolio. For me, such behavior from the investors are considered to be careless. However, if the investors have taken active interest in their portfolio and still lose money… well… I would want to say the planners and the banks shouldn’t be responsible, but it’s difficult to argue that point.


    Apr 15, 2008
  3. Since I got my housing rant out earlier in the day, here’s my “real” answer to your question, Nancy:
    Consumers will “pay” right now (their portfolio will be worth less than they were hoping), banks will pay in the long run (their reputation/credibility will suffer and they’ll have to lower their profit margins to attract customers from other investment opportunities).
    I’m sure it’s in the banks’ terms of service that they’re not guaranteeing the quality of the advice they’re giving (etc. etc.), so I’m not sure what the customers’ claim is… Nancy?


    Apr 15, 2008
  4. I think they should be allowed to sue.

    The whole point of the “know your client” regulation is so the advisor understands the risk tolerance/goals etc of the client and is obligated to recommend appropriate investments.



    Apr 15, 2008
  5. @Jan – I’m sure there indeed will be credibility issues, esp., as individual stories start to surface. Good point about the ‘who pays’ issue – it will take a while to play out (and I think it hasn’t even begun)
    @Angela – it’s such a fine line. I wish waaaaay more canadians would invest some time in understanding Investing 101. In fact, maybe it should be a requirement before handing money over to another person! Generally, I agree with you, however…. as
    @Four Pillars (tx for dropping by!) points out — somehow this one just doesn’t seem quite right. The magnitude of this, and since it seems to have been touted as a conservative investment — walking away and leaving the investors stranded seems just wrong. I guess that’s why Canaccord and Credential are trying to work things out.


    Apr 15, 2008
  6. Angela

    Nancy, I have no problems with investors suing those financial planners whose main objective is to make more money. How can those planners work for the investors’ best interest? But then, I still believe investors should be careful. Then, they will have less chances that bad investment would ever affect them.


    Apr 16, 2008

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