The "So-Called" Experts Part V: My Frustrations with Investment Advisors

In an ideal world, your investment advisor would treat your portfolios performance as top priority, giving you every advantage that they can, and take a small cut for themselves for their efforts.  However, as is so often the case, the world is not perfect and often the latter is true, but the former too frequently lies in a somewhat grey area.

The problem with advisors and something like a mutual fund is that the higher the MER, the more the manager gets paid.  Of course if the MER is too high, you can skip right along and pick another mutual fund to invest in because you are a savvy investor.  But I would argue that most people aren't.  Those who are uncomfortable with making decisions will trust their advisor to choose for them. They are professionals aren't they?  It is this group of people that is most susceptible to buying into sales pitches such as "great past performance" to make up for the higher MERs, and it's their advisor that tricked them into it.

I have read about this in a few books that I've picked up, and heard about it through others online, but actually experienced it for the first time when I was trying to set up my e-Series account.  The advisor at TD was persisting on a TD Dividend Growth mutual fund with an MER of just under 2%.  Despite my resistance, she continued to point out it's great return average of 6%.  At this point I well understood the benefits of index funds over actively managed funds, so I politely declined.  I still found it frustrating that they have this great e-Series fund account with MERs below 0.5%, and yet they never recommend them to anybody.

I'm not the only one who had this problem with TD.  If you take a quick look online for the experiences people have had, it ranges from pure ignorance of the advisors about the existence of an e-Series account, to extreme arrogance from the managers about how it is a terrible investment and you are a fool for not investing in their actively managed mutual funds.

It's unfortunate, but as I mentioned in a previous post anybody can call themselves an investment advisor or analyst, so the person you are working with may not be as devoted to your portfolios long term growth as someone that holds a Certified Financial Planner designation might be.

This obviously does not apply to every advisor.  I'm sure many of them take their job very seriously and get great satisfaction out of doing the best job for their clients, but it is definitely something to look out for.  I would recommend picking up a few books and going into your advisors office with some understanding of what you are investing in so that you can have a discussion with them, rather than blindly taking their advice.  

Who knows, you might end up realizing you are capable of managing your investments alone.