Juggling Dynamite

Self-dealing, breach of trust business models are so mainstream and lucrative in finance, many seem to feel that resistance is futile and we have no choice but to keep feeding the beast.  This thinking is financially suicidal and must change.

Of course we can and must demand that ‘advisors’ be held to a fiduciary standard.  We do so in other critical advisory professions like medicine, law and engineering.  Similar potential conflicts of interest are inherent between doctors and big pharma companies for example, and we still demand doctors honor a fiduciary standard of care or face prosecution, lawsuits and loss of their ability to practice.  See more on the never-ending battle for pharma payment transparency in medicine in Canada’s pharma companies disclose payments to doctors for 1st time:

In the U.S., any transfer of value to a doctor exceeding $10 must be disclosed by law. The information is publicly available on a searchable website, with details about travel, meals and other reasons for the payments. There are similar laws in France, Portugal, Denmark and other European countries.

“Unfortunately Canada is lagging behind,” said Dr. Andrew Boozary, a Toronto physician who leads the Open Pharma campaign, which calls on Ottawa to require mandatory disclosure in Canada.

“The backbone of any physician-patient relationship is trust. Where there could be perceived conflicts, where this is not public, where this is confidential or clandestine for whatever reason, [it] can really start to erode that.”

In finance, rampant self-dealing is the norm and nearly unchecked, especially for the largest firms who largely fund and staff revolving-door regulators, and pay cost-of-business fines only here and there.  The fact that most financial advisors and finance executives don’t see a need to reform the status quo, speaks volumes.

In the meantime, we taxpayers and individuals will continue to pay the compound cost of harmful financial advice, while bailing out and backstopping a lawless system.  See From Hawaii to Italy, free trips fuel retirement savings sales push:

Financial firms that reward salespeople with free vacations for promoting retirement investments — including some high-fee products — are pressing the Securities and Exchange Commission for leniency in a looming rule covering sales practices.

On April 18, the SEC is scheduled to propose new regulations for financial advisers who offer savings products such as mutual funds and variable annuities.

Companies such as Primerica, Edward Jones and John Hancock want the agency to develop a less-stringent version of the hotly contested fiduciary rule that the Labor Department finalized in 2016 to ensure that advisers act in the best interest of clients. These firms are hoping to get a more sympathetic ear from the SEC, an agency headed by one of President Donald Trump’s nominees.

At stake for the firms is an incentive system for brokers..Financial advisers are paid millions of dollars to sell products to people who may be oblivious to potential conflicts of interest fueling the sales practices.

The stakes may be even higher for Americans saving for retirement and seeking investment advice from brokers providing mutual funds, insurance and other products. Small investors end up paying for products involved in incentive programs that allow salespeople to go on free vacations to destinations from Hawaii to Italy.

“In my experience, the worse the product, the more it needs big incentives to sell it,” said Scott Dauenhauer, owner of Meridian Wealth Management in Murrieta, Calif., and an investment adviser.

Yesterday as Mother Nature was showing us all who’s boss and pounding Ontario with a mid-April snowstorm, I got to cleaning out the storage space under our stairs–as one does.  I came upon a bag of forgotten artifacts and papers.  Some of them were letters my mom had written hers in the ’70’s.  Others I had written my husband 30 years ago.  Some his sister had written to him when he was on a tour of duty in the Middle East in the 1980’s.  All so unexpected, I had no idea we had these things.

My mother suffered early onset dementia in her late 50’s, and for over a decade has had no language or recognition of anyone.   In many ways it’s as if the disease has erased her.  And I have struggled to remember what she was like.  So, imagine my delight when yesterday, under the stairs, I came upon a book she had put together for me in 1995 when she was 55 and just starting to sense what was coming for her.  No doubt it’s why she made me this book, although I had no idea at the time.   Inside she has written pages of detail about her parents and my childhood and fond memories she had of our life together.  It was as if the past came back from the dead, all in an instant.  Needless to say, quite an emotional find.  It’s amazing what we forget and then instantly recall, once presented with visual cues.

Something else I came upon, was a package I had put together before applying to law school, when plan A was to find an agent and become a professional actress and screenwriter. Believe it or not.

The head shots are pure ’80’s. Check the Farah Fawcett.

Life is funny.

Ralph Waldo Emerson wisely observed that “A man in debt is so far a slave.”   I have regularly pointed out that those reaching for dramatically over-valued assets using debt are risking financial suicide.  The two go hand in hand: for it is only with credit that prices can levitate so far beyond fair value, savings and income levels. When credit is maxed out, prices inevitably retreat and the tide of irrational exuberance turns to wipe out the highly levered.  But also, even those who were using cash savings and not leverage to buy, experience evaporating net worth as prices fall and contagion spreads.  This story reminds of the real life costs.  I’m afraid that Canadians have earned an extended period of painful revelation.  See Couple ordered to pay $470,000 after reneging on Stouffville home deal:

“David Lea and Yixing Hu submitted an offer of $2.25 million in April 2017 after being told there were multiple competing offers for the property, originally listed at $2 million, according to court documents. The bid was accepted, but not long after the market cooled and the Newmarket couple had second thoughts.

Feeling they’d overpaid for the property and having trouble making the down payment, the couple pulled their offer. In the summer of 2017, the market value of the home had dropped to about $1.8 million. The homeowners sued, and in a court decision this month, the judge ruled Lea and Hu had to pay the difference…

We’re probably going to have to rent somewhere. We’re trying to figure that out. I’m going to see what I can afford every month, and pack up the kids’ stuff,” Lea said, who is a father of four. “I have no choice. It’s the worst of the worst because you take the hit on their property and get these big damages, but at the same time (the value of) my house has dropped. I can barely sell it for $1 million.”

…Lea said the Stouffville property would have been the last home he and his wife bought — a place to retire in.  “I’m trying to be as positive as possible. This stuff can just destroy your health,” he said.