This statement on a real estate agent’s blog last month caught my eye:
“In Canada, the middle class are relying more on real estate agents for retirement advice than licensed financial consultants.” –March 3, 2017
Since our homes represents the lion share of net worth for Canadian families, this statement is undoubtedly accurate. It’s also true, that realtors and mortgage brokers (aka “mortgage architects”), like the vast majority of those working as financial consultants/investment advisors today, are licensed sales people who earn fees on transactions, and owe no fiduciary duty to put the best interests of their customers ahead of their own profits.
We also know that a frenzy of borrowed money, speculation and money laundering has driven a massive surge in price and transaction volumes over the past few years. The cash flow running through the broker/dealer/financial sector has boomed along for the ride. But for all their self-proclaimed expertise and savvy, as this cycle moves toward its inevitable conclusion, the defining question, as always, will be this:
How many realtors/mortgage brokers/financial ‘experts’ used the boom period to pay off their own debt and build up cash? Rather than the opposite?
The answer as usual, will be, not many. As the bubble tide recedes, truth will be revealed once more. As cash flows plunge, foreclosures and loan/lease defaults rise, repo men will be coming to take back a fleet of the fanciest autos and gizmos. Lawsuits, investigations and charges for illegal activities will follow. Same story, every cycle. Stay tuned.
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