Canada’s financial industry is dominated by six big banks—TD, RBC, Scotiabank, BMO, CIBC, and National Bank. All of them employ financial advisors who get paid by investing their clients in funds that charge very high yearly fees, a portion of which ends back in the advisors’ pockets.
Because advisors in Canada do not have to be fiduciaries, i.e. act in the best interest of their clients, they are legally allowed to recommend investments that increase their income, even though cheaper options like indexed mutual funds or ETFs that better serve their clients are likely available, often at the very banks they work for. This is the definition of conflict of interest, but it’s called ‘the suitability rule’ under Canadian securities law. And there’s no incentive to change it, because lower fees mean a hit to the banks’ bottom lines.
The solution? Ask your advisor to be a fiduciary for you, even if they aren’t strictly required to be. If you bring it up, they can either abide by your request or perhaps recommend someone who will.
It’s also not a bad idea to brush up on your investing basics so that, when you have some money to put away, you can give your mattress a rest, and invest it in the stock market yourself for little to no cost.
Disclaimer: This article is meant for general education purposes only. It does not constitute financial advice as I am unaware of your personal situation. Consult with a professional who abides by a fiduciary standard before making any investment decisions.