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I've been using the same financial adviser as my my family and am wondering if Canadian financial advisers who work at the bank specifically Scotiabank would purchase mutual funds that specifically benefit themselves. I am not saying that they make bad investments, but they make their investments based on the bank.

Someone mentioned to me when I told him that I used the guy at the bank that they are bad first because we pay too much management %, second, because they purchase the funds that benefit them. I do see all my funds purchased through my bank were funds from Scotiabank and he has been making frequent purchases rather than lump sum purchases.

It seems like the adviser isn't directly benefiting from this, but Scotiabank is. Any info would be helpful. Maybe i'm just being paranoid.

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    Related article: canadiancouchpotato.com/2013/06/13/… Yes, your friend's concerns are valid. That is to say, worth considering. – ChrisInEdmonton Jul 28 '14 at 20:29
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    In short: there is a conflict of interest. CBC Marketplace aired a special about financial advisers in Canada just a few months ago. You can watch it for free on the CBC web site. – Chris W. Rea Jul 28 '14 at 20:33
  • Thanks guys.. I read the couch potato article and I really want to look at that CBC Marketplace special you are talking about. I had a feeling about this before but hes made me some money and my Mom even more so didn't really think of it. – leeman24 Jul 28 '14 at 20:36
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    What commissions is the FP making from the products he recommends you, are they transparent? Do you pay him a fee for service,or does he get paid totally from his commissions? In Australia they have banded FPs from receiving commissions and soft dollar payments, and they can only now be paid by fee for service. – Victor Jul 28 '14 at 22:18
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The way this works, as I understand it, is that financial advisers come in two kinds. Some are free to recommend you any financial products they think fit, but many are restricted in what they can recommend. Most advisers who work for finance companies are the second kind, and will only offer you products that their company sells. I believe they should tell you up front if they are the second kind. They should certainly tell you that if you ask.

So in essence, your Scotiabank advisor is not necessarily making bad decisions for you - but they are restricted in what they will offer, and will not tell you if there is a better product for you that Scotiabank doesn't sell.

In most cases, 'management fees' means something you pay to the actual managers of the fund you buy, not to the person who sells you the fund. You can compare the funds you are invested in yourself, both for performance and for the fees charged. Making frequent unnecessary changes of investment is another way that an advisor can milk you for money, but that is not necessarily restricted to bank-employed advisors. if you think that is happening to you, ask question, and change advisors if you are not happy.

  • Thanks.. this is right on the money.. It is not that I am not happy with him since he seems to be doing ok. It is just that if he is just throwing my money into a mutual fund that Scotiabank owns and just setting scheduled deposits, I could probably take on that task myself. I will have a chat with him soon. Thanks. – leeman24 Jul 29 '14 at 21:16

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