The Difference Between Good & Bad Advice with Harold Geller | E047

A lawyers prospective on knowing when you are not getting the right advice and what to do about it.

In this episode of Financial Planning for Canadian Business Owners, Jason Pereira, award-winning financial planner, university lecturer, and writer, interviews Harold Gellar, a well-known lawyer that represents clients when their financial advisors lead them astray!


Episode Highlights:

  • 1:10 - What does Harold see as the value of financial planners?

  • 3:09 - How should an individual consumer know when they are with the wrong financial advisor?

  • 5:30 - Harold discusses the value of financial planning exercises.

  • 7:17 - Jason and Harold talk about the lack of knowledge surrounding what financial planning is for consumers.

  • 12:00 - What information should financial advisors be presenting to their clients?

  • 14:58 - Are there any other red flags that people should be looking out for?

  • 17:45 - Harold breaks down what diversification really looks like.

  • 22:40 - Jason and Harold discuss the book, Are You a Stock or a Bond?

  • 25:53 - Does tax-law harvesting count as a red flag?

  • 26:59 - When do the actions of the financial advisor turn into recourse for the consumer?

  • 34:51 - What should consumers be looking out for when choosing an advisor?

  • 40:00 - Jason and Harold discuss behavior that loses business for financial advisors.

3 Key Points

  1. An initial red flag that individual consumers need to look out for is how their financial advisor communicates with them in the language they use and how they discuss risk.

  2. Too many financial planners focus on throwing as much information as they can at their clients when they should be focusing on communicating complex ideas in plain language.

  3. Clients that have seen a major loss should get a second opinion from a different financial advisor before moving to legal action.

 

Tweetable Quotes:

  • “The best financial planners are as important to our community as the best doctors, the best lawyers, and other professionals.” - Harold Gellar

  • “If you have a solid financial plan, then there will be planning for downturns which are going to occur on a typical basis.” - Harold Gellar

  • “Do you really want to have a lot of money in your company’s stock...when all of your ability to earn income is tied to this same company?” - Jason Pereira

  • “I don’t need to gamble more. I’ll gamble where I think I control outcomes or at least control factors related to the income.” - Harold Gellar

 

Resources Mentioned:

Transcript: Producer: Welcome to the Financial Planning for Canadian Business Owners podcast. You will hear about industry  insights with award-winning financial planner and entrepreneur, Jason Pereira. Through the interviews  with different experts with their stories and advice, you will learn how you can navigate the challenges of being an entrepreneur, plan for success and make the most of your business and life. Now, your host,  Jason Pereira. 

Jason Pereira: Hello. Welcome to Financial Planning for Canadian Business Owners. Today on the show I have Harold  Geller, a well-known lawyer in the area of basically suing advisors, for lack of a better term. But  representing clients when advice goes wrong. That's exactly what I brought him on to discuss is when do  you know, or what should you be on the lookout for to know that you're dealing with the wrong person  and when is that wrong person actually breaching their requirements or obligations to you? With that,  here's my interview with Harold. 

Jason Pereira: Harold, thank you for taking the time today. 

Harold Geller: My pleasure, I look forward to our discussion. 

Jason Pereira: Before we get started, there is one thing I want to address and despite the fact as I joked, you're the  kind of person that sues people in my career path, not me specifically, otherwise we wouldn't be  chatting. But, specifically, I mean, one thing I want to clarify is you're someone that actually sees the  value in planning. We've had this discussion before. You see the value in comprehensive planning and I  think it's an incredibly profound thing for someone who's seen the worst side of this industry on a  regular basis to say that. Can you speak a little bit to what it is you see that you think is of value? 

Harold Geller: Yes. I'm pleased to address that issue. The best financial planners are as important to our community as  the best doctors, lawyers, and other professionals. In fact, financial planners are probably with the most  high-net-worth people for a longer period of their lives than a transactional lawyer would be, so they  have a greater value. They should be looking at a number of things. First of all, what your assets are,  what your debt is, what your spend is, how you can improve those three criteria. And then planning into  the future, looking at your objectives, your goals and your risk tolerance. Helping to guide you through  what can be a very complex planning exercise, as well as helping to introduce you to suitable products  that are in your best interest and which would match your long-term goals with what is available in the  marketplace. Those skills are of great value to our community. 

Jason Pereira: Absolutely. I mean, you're preaching to the choir. What can I say, I've got a conflict on that one where  that is what I do for a living and that is exactly what I believe is of value. So again, when we first  communicated, I was quite pleased to see that you saw the value in what was being done on this end.  So that is, I guess, that's kind of the first warning sign, right? So the first how do you know as an individual consumer, when you might be with the wrong person? I guess maybe  the lack of comprehensiveness is something you might say is one of the first things you should be  looking for. 

Harold Geller: Yes, I'd like to start one step earlier, Jason. That's with the importance of communication between the  financial advisor and client. This is absolutely essential. If a financial advisor is talking to you in legalese  or financialese, that's a problem. The consumer is the ultimate decision maker and if the advisor cannot  explain what the considerations are, what the recommendation is and why that's suitable for you in  terms that you, the consumer, can understand, then that advisor's really failed in their job. I start with  does the advisor communicate with you in language that you can understand. 

Harold Geller: A second element of that is whether the advisor talks about the risk. Not just the risk of not planning. I  hope that they're discussing with you the value of planning and looking at the risk. But also the risks  inherent in investing. In each vehicle there are risks, and they should be what a professional talks to you  first about, not last as almost a PS to a note. These are important factors for you to consider. Sorry, I lost  what your question is. Please ask again. 

Jason Pereira: No, that's fine. It was when you know... Actually, let me just jump in there. So it's interesting you say the  first two things being communicating in kind of jargon and the second piece being not discussing risk. It's  funny, because I think more often than not, I think maybe this is a security level that comes with some  advisors, is that a lot of people often times think that they are there, or to try to prove to the client early  on just how smart they are and why you should give me the money because you're so smart, or the  return I'm going to earn. And the reality is, when you're out there, for lack of a better term, competing  solely on an investment basis and solely on returns, that is the language you have to more or less speak  to impress anyone. Whereas I agree with you. If you're not using jargon, speaking in their terms, and  specifically focusing on risk, that's far more of a planning conversation. 

Jason Pereira: I think that's a far more differentiated conversation, a nuanced one, from what is normal. I generally  agree with both those points, but is there anything you wanted to add to that, or if not, you can 

Harold Geller: Absolutely, because the third element of that is exactly why you and I agree on a lot of issues, which is  the value of a financial planning exercise. Not just as a snapshot at the time of onboarding a client to the  advisor, but as an ongoing process. This is particularly important for long-range planning, but it also is  important for periods like we've just experience in the last year with the relation of the financial markets  and investments to COVID. If you have a solid financial plan, then there will be planning for downturns  which are going to occur on a cyclical basis. 

Harold Geller: Although you can't predict exactly what the cause of the downturn will be or exactly the sector that will  be hit, you can plan a robust portfolio which will be able to withstand the vagaries of the market. And so on the eve of March 9th or whatever it was this year, if your client calls and says there is a terrible  market event occurring, you're able to take them back to the financial plan and say that's okay, we've  planned for it. We've planned for your future. We've got cash on the side in case you have immediate  needs. We've got a plan. Let's stick to it. Very reassuring in times of great uncertainty. 

Jason Pereira: Yes. I'm just reliving what my conversations sounded like in March and April. Right up that alley. So isn't  part of the challenge in general that a lot of consumers just have no idea what financial planning is?  They think it's simply running people's investments, right? So if they go to someone and look for advice  and they get investment advice, a lot of times they think that's what they were looking for in the first  place, right? 

Harold Geller: Yeah, so I think most people if they were explained what financial planning was, would expect that from  all of their advisors regardless of the designation, regardless of the title, and regardless of the executive  thing, whether they're a Vice President or a consultant or whatever they are. People go for planning  really and recommendations coming out of planning. I think that it's very important for the consumer to  have a plan which is in plain language. 

Harold Geller: Again, one of my real concerns in a lot of planning that we see is that the big institutions have these  template plans. These templates have, respectively, a thin layer at the beginning and a whole bunch of  charts at the back with neat numbers which are the consumer's own experience. Your experience. But  the rest of it is all template and in language you can't understand. I say you can't understand because it's  a lot of industry jargon which needs to be defined. Terms which seem to be common sense are not  common sense in the financial world. Let me give you an example: medium-risk. 

Harold Geller: Medium-risk seems like such a simple term, but medium-risk is very much a subjective experience  where the advisor has a duty to assess your risk tolerance and not simply to ask you what is your risk  tolerance. If they simply ask you and put down what you say, then they fail to exercise the necessary  judgment. You see, there's a real layer of financial acumen that goes behind the simple question. And  financial plans should have an explanation of what is meant by the financial planner when they use  these terms. 

Harold Geller: Another example is time horizon. Simplest thing is, is that first dollar out or last dollar out? [inaudible  00:09:15] from the accumulation of pay to the deaccumulation, that is really simple. You stop saving and  you start drawing down your investment. Well that's a really big factor, and if that's, like most of us,  when your risk tolerance changed, then that should be the time horizon. Which they have often time  horizon moves in different documents between first dollar out and the last dollar out, which is when you  expect to run out of money or die, whichever is first. Again, this has to be a meeting of the minds. It has  to be explained to you. And the document, the financial plan, should have clear definitions of this so  that you and your advisor on the same page. 

Jason Pereira: Yes. Unfortunately, financial planning in general has been kind of the free toy at the bottom of the  Cracker Jack box or whatever it might because it was sold as an add-on or value-add to the thing that  they really cared about, which was the investment management. Now, I've always said, frankly, if you  take the opposite viewpoint, you're going to be much more likely to manage all their investments and  larger ones too. And I've proven that, as many others have in their own practices. To further your  comments about the plan and the templated stuff, yuck. I mean, I often scratch my head as to why  people will dump 90-plus page financial plans with every spreadsheet and form, and every projection  known to man on people. It's as if they're trying to justify their value based on the thickness of the plan  itself. When frankly, I agree with you. If the client can understand what it is you're doing and you're not  executing on those strategies, then there's really no value to the entire process. 

Harold Geller: Absolutely. We discussed a little bit earlier a real crutch used by inexperienced and unprofessional  individuals is to use big words and fancy terms. A true leader, a true expert in the area, has to be able to  communicate effectively as I've said before. They can take these complex ideas and communicate them  in ordinary, plain language. That's when an advisor is really at the top of their game. It's not the big  words. It's not fancy charts. It's not pages upon pages of a running calculation. Unless you are an  accountant or somebody with particular financial acumen and you're going to a financial planner, that's  probably the only time when these fancy charts and these lots of numbers are intelligible to the  consumer. For the rest of us 

Jason Pereira: I often say we overthink these things. Basically, it should be goals and objectives. No, first of all, who is  the client? Goals and objectives? What's their income and expenses? What are their assets? What's  their balance sheet look like? What's the projection of all these recommendations we're making look  like? Sorry, as well as what's the portfolio and the risk associated with that? What do the projections  look like? And then what are the recommendations? And then, if you want to throw a bunch of tables in  the back in the appendices after the recommendations, that's fine. But you really could sum up a  financial plan in less than ten pages. Let's call it even five to six. 

Harold Geller: Absolutely. You've actually proven something which is incredibly important and amazingly often not  handled properly. Who is the client? You and I have parents who have had financial holdings. Often, as  they age, one of the children steps in and becomes the intermediary, the person who talks to the  financial planner or the financial advisor. Well, that person, that son or daughter, is not the client. The  client is the parents in that scenario. And you can't confuse the sophistication of the child or the goals of  the child or the fact that they may be the planned person who will inherit the money with the client. The  client is the parent in that scenario. If it's a trust, it's the trust that's the client. It's not the beneficiaries.  And it's not the person who is handling the trust. We must remember who the client is. 

Jason Pereira: I would say actually that flips around the other way because I've had older clients say to me well, if all  this money here in this pile is going to be inherited by my kids, maybe I should take a less conservative  approach with that money because it's going to them and they've got a longer timeline. To which my  response is always well, that may be where it's going, but you're the client. And you're the one I've got  to sit across from should anything go wrong. Then we have a risk versus reward conversation again and ask for example if basically I ask them a question of if this is a million dollars and it was down 200,000,  what would you do. So to add to your conversation there, it's not just remembering who the client is but  always bringing the entire context of not who the client is but also bringing back those other points of  conversation, the risk and reward conversations, to that in the context of whatever we're addressing. 

Harold Geller: Very true. It's not wrong for that client, the parent, whose funding the inheritance or the trust to decide  to take more or less risk, but it should be something that they're comfortable with and it should always  be that in mind when the financial planner talks to that client. 

Jason Pereira: Okay. So we've identified three big ones. Communication, typically I like to call it talking over the client  as opposed to them. You're basically just spewing jargon as a means to try to prove that you're  impressive to the room. Not addressing risk. Only looking at the upside, not addressing the real  challenges on the downside. And the comprehensive and actual tangible financial planning. Any other  red flags people should be looking for? 

Harold Geller: Something particularly in these times that there are winners and losers in the market is unexpected  volatility and unexpected losses in your portfolio. If your advisor is either avoiding your calls, that's a big  red flag. Or if the advisor is saying it's just the market, it's not the plan, then that's again another red  flag. They should be able to take you to your plan and show you how the volatility or risk of loss, two  different concepts, how they are in your plan and they were discussed with you and you agreed to them.  Personally, I think that these things can be shown in a particular chart, which is the... To show that if  you're talking about the potential gain, also show in the same chart the potential for loss. 

Harold Geller: There are lots of studies on this, Jason as you know, about the asymmetric experience of the investor  between gains and losses. Investors expect gain. They expect reasonable gains at reasonable price. What  the advisor's duty is is to bring them again to the risk, to the potential of loss, and this should be in your  financial plan so that there is again, the advisor and the client is on the same page and they both know  there is that potential. Particularly if it's volatility. The line that I said earlier, it's the market and not the  plan. Well, if it's volatility that you knew your investments could be volatile and you had a plan to stick  with the investment until a pre-determined exit point or a re-evaluation, that's the benefit of a plan in  uncertain markets. Jason Pereira: Yes. Agreed. And it's really not that hard. I mean, we do this in our process as well. It's really quite  simple. Here is what our "balanced portfolio" looks like. Here is the historical downside, the worst case  scenario experience in the last 40 years. Here is the best case. Here is the average. Know that this sort of  thing is not beyond the realm of reason. It is very possible that you will see a drop within that historical  range to that downside within your lifetime of investing, if not multiple times. I always just have them  do a visioning exercise where we basically say you have X amount invested with me, you open up the  statement, and it says you've lost this much. What is your reaction? Because if your reaction is well, I'm  going to cash out, or I'm going to fire you, or do whatever else, then this is not the right solution for you  quite honestly.

Harold Geller: Very simple. You also see diversification for most of us in our plan. Diversification is not just simply  diversification among your invested assets in the market, but let me give you an example. We've seen a  lot of cases coming out of the Alberta oil and gas market. Of course, we know that that oil and gas is  boom and bust. We also know that a lot of people have a very significant part of their net worth in their  home. If you're in Alberta, your homes and vacation properties if they're in Alberta, are likely to  fluctuate along with the oil and gas market. So you can't say that that is a diversified portfolio if you  have a whole bunch of the bigger oil and gas companies, you have banks which are closely correlated  with the oil and gas market, and you have real estate in the area which could be influenced by oil and  gas markets. Diversification has to look at the whole plan diversification, and not just invested assets.  Another area of red flags. 

Jason Pereira: Yes. So that is a term called human capital, which I would say unfortunately the industry does not pay  anywhere near enough attention to. The simple real, I mean when it comes down to it, is do you really  want to have a lot of money in your company stock, which is "your financial capital," when your human  capital, which is your ability to earn income, is tied to the same company. The probability of that stock  being down at the same time you lose your job is probably pretty high. That's not looking at... I mean,  we think about diversification, we think about stocks, bonds, global, international, and across sectors,  but it goes beyond that. It's what else is happening in that person's life and that's what you're getting at.  Lack of consideration for the human capital and other financial capital might be tied to their human  capital. Anything else you want to add? 

Harold Geller: Another good example for myself is I'm a businessman. I'm in law, but I take a lot of what's called  contingent retainers. Pay when you get paid. There's risk in my business. It's not unusual for a business  owner to have risk in their business. Because of the risk, which is if I can invest well in my business  where I'm very knowledgeable and can really feel and experience the risk and predict to some degree  how to respond, when I take my money off that table, that is my business table, and put it into  investments, I have to take into account that I've got a lot of risk already in my portfolio, and that's my  business portfolio. So I want very low risk in my investments because I can't really afford to take risk in  those. I take risk where I can make a difference. 

Harold Geller: Now that's something which I've actually... Using myself as an example again, had a great deal of  problems with some financial advisors and their dealership who say "Well, Mr. Geller, you're 55 years  old. You're highly educated. You have a high income. You have knowledge of the markets and investing  for a long time. Therefore, you should be medium to high risk. [inaudible 00:21:03] ten years until your  retirement." And I say that's absolutely the wrong analysis for a financial planner. I don't need to gamble  more. I'll gamble where I think I control outcomes or at least control factors related to income. I'm not  going to take gambles in the market, which I know I'm a guppy in even though I've been investing since I  was a kid. Even though I work in this area, I know it's a crap shoot what's going to happen on any  investment that I do unless I de-risk it down to a real minimum that I can palate and go to sleep at night. 

Jason Pereira: So now we're actually talking about the second dimension of human capital, which is the volatility of  that capital. For those who want to learn more about this, the book Are You a Stock or a Bond by Moshe  Milevsky, a friend, mentor, and former professor of mine, specifically addresses this in very easy to  understand parlance, but we talked about 

Harold Geller: I'm going to jump in there, Jason, because it's one of the best books for people interested in their own  investment because what it does is take you away from the complex analysis that a few of have the  mathematical background to do and talks in common sense about [inaudible 00:22:20] and about how  your risk tolerance should change over your lifetime as you go through lifetime events. It's an excellent  book. I'm sure he's a great mentor. 

Jason Pereira: He is a fantastic one and a fantastic professor. I will plug his book. I am conflicted so you can take my  word for it. I would not just say this about anyone, but great book. But exactly, right? Let's just look at  this in parts. It's funny because you just actually tweeted something recently about Are You a Stock or a  Bond, and the example we always use is if you're a tenured professor, your money is as close to  government bond like as possible, right? Because you pretty much can't be fired with the exception of  basically doing something really wrong. You can pretty much count on that income coming in every year  no problem. If, on the opposite of the end of the spectrum, I think, let's just say for example, you're a  mutual fund manager who manages nothing but one type of equity fund in one sector and your salary is  based solely on the performance within that sector, just normal performance of the market... So  comparatively to that professor, let's say that you are an equity fund manager, right? And you basically  make money based on the performance or the assets under... Well, let's just say it's all performance.  Well, that is the purest form of "stock-like income." So, your income is highly volatile. 

Jason Pereira: What the argument is, is that with human capital is that you should consider what the allocation is in  terms of industry and other factors as well as volatility into the grand scheme of things in conjunction  with your investments. I'll often find more often than not, there's a familiarity bias problem that people  have. So, for example, you mentioned the oil and gas people. People who make their living in oil and gas  love to believe in investing with nothing but oil and gas. People who work in technology love to invest in  nothing but technology. But those are really, really, really highly correlated outcomes. Just regularly  cyclicality can be devastating. 

Jason Pereira: Again, if you're an advisor who is not taking this into consideration, then quite frankly, you're negligent.  That said, everybody lies on this spectrum somewhere. We can assume the average person's  somewhere and the average and middle, but for those who are the poles, it really needs to be a  consideration. 

Harold Geller: Yes, I think the familiarity bias is a real opportunity to show their mettle. I'm not looking for yes men or a  cheerleader to be my advisor. I want somebody who is going to back me up, make me look at the basics,  and talk to me about some of the risks in my assumptions when I may have... Of course, they're  assumptions, I may have glossed over them. The tendency to go with what you know and where you think you have a strategic advantage, it may be true in business, but in the stock markets, it's rarely true.  In fact, it tends to, the studies show, look at overconfidence and be inversely correlated... Your belief is  inversely correlated to your ability to predict outcomes. 

Jason Pereira: Agreed. So, okay, not taking into consideration both dimensions of human capital, lack of  comprehensiveness, not discussing risk, poor communication, any other kind of just general red flags? 

Harold Geller: Not that I can think of right now, but as we speak, I'm sure I'll call another one a red flag. 

Jason Pereira: Fair enough. 

Harold Geller: But if your accountant is calling you up and saying "Did you know you have losses?" And you didn't,  that's a red flag. 

Jason Pereira: Fair enough. Well, let me ask you in a different context. If the person is acting as a portfolio manager  and is tax loss harvesting throughout the year, that would not necessarily be a red flag, would it? As long  as the tax loss harvesting as a concept was communicated to them. 

Harold Geller: Yes, as long as what they're not doing is as a strategy, in effect, selling the winners and keeping the  losers on the books and every once in a while doing a little bit of tax loss selling at the end of the year  just to be able to say they're doing so. The red flag is associated with the regular sales of things for profit  but what your portfolio is holding more and more is things with losses. 

Jason Pereira: Okay. That's interesting. I hadn't thought about that, how people will avoid selling things that are losers  to basically not have to take that loss and look bad to the client. I've never really experienced that  before. I guess I don't think that way. 

Harold Geller: I see the worst things, as we said at the beginning. I can be a cheerleader for those who do it right. 

Jason Pereira: Fair enough. Okay. You find out you're with the wrong advisor, the first thing to do is always just change  advisors, right? You have that option. You can always have a conversation with them to make sure your  expectations of them are correct, but changing advisors is an option. When does it cross the line into  something that there is recourse for the consumer? 

Harold Geller:I start by looking at the documents themselves and look at what the records show. And these aren't just  the records that are in the hand of the client, because the client really only sees the tip of the iceberg.  They often are in the worst position to actually judge whether the advisor did what was required under  highly regulated and sometimes fairly complex requirements. But just to give an example of that, a  client may have had a really good relationship with an advisor where they thought that the advisor was  always doing what was proper, this is in what is called a non-discretionary account meaning an account  which the advisor isn't the portfolio manager, doesn't have the discretion to make all decisions, but  really the advisor just phones up and says I really like Bank of Montreal, let's put 50,000. The client may  think that was an authorized trade if they say yes. In fact, that was a breach of fundamental rules  because there were four requirements, two of which were not covered in that conversation as I just laid  it out. 

Harold Geller: So that means that the trade was not properly authorized and if there was a loss associated with it,  there is both a regulatory complaint and a potential claim for compensation. We look at a couple of  things when we're filtering through to see which claims we'd recommend going forward on. First of all,  we look for capital loss. Not just opportunity loss unless it's a very long time frame. We look at capital  loss. The second thing we look for is whether the finance plan was objectively suitable for the investor.  And so, we then compare what was objectively suitable against what occurred and we look for then is  there losses associated with any of those failures in planning. If there are that connection of a loss with a  problem that caused the loss, then we have two of the three elements for commencing a claim. The  third actually is just timeliness. 

Harold Geller: Once you knew or ought to have known that your advisor failed you, that they caused losses, and this  was a result of mistakes made by the advisor or breaches of rules... Very much rarer that people know  whether they're breaches of rules, but they know the damages were caused by that. Then they have to  sue within two years. They have six years to go to the ombudsmen of banking service and that's... But  only two years to commence a lawsuit. And the lawsuit, I said the key element of a legal definition of  timing, consider it like a light bulb turning on. So many consumers might say well I thought I was  supposed to be invested in secure, safe investments, and I lost money, but the advisor said that was the  market, I didn't really think anything more was wrong until I learned that the advisor had a problem with  the regulator or I spoke to another advisor and they said no, no the investments were never suitable for  you, that is suitable being a regulatory breach. It's from that point, when you realize, that light bulb  turns on, and you realize that there was a breach it caused your damages, then you have to sue within  two years. 

Harold Geller: So what we recommend is if you're not sure, first of all, get a second opinion from somebody who's not  at the same institution and is independent and ideally has good credentials as a financial planner. Then  if they think there was a wrong done to you, then promptly reach out to a lawyer who has experience in the area. Many years can sue and they can do it competently, but there are some hurdles in specific  areas, be it construction law, medical malpractice, or financial loss. And you have to understand the  products and the obligations of the advisor to be able to, as a lawyer, to give a good opinion on whether  or not there is a meritorious claim and financially it makes sense to pursue that course.

Jason Pereira: That's interesting. Those are, I'd say, failures of duty. There's also the more obvious things that cross the  line into borderline theft or negligence, but I think those are a little bit more obvious when people go  looking for them that that might be the case. So really what it comes down to in a number of ways,  failure to communicate action, failure to provide proper due diligence for the client in regards to  recommendations made in light of their situation, and I guess that's timeliness is really what it comes  down. 

Harold Geller: Yes. [inaudible 00:32:08] are not many firms. The firms that do this area like myself, we get a lot of  claims or calls at least for potential claims. Just to give you an idea, in the first phone call, which I don't  charge for unless we get retained, we turn away somewhere between two in three or three in four  initial calls because we're able to ferret through the information and give a quick opinion on whether it's  timely or whether it sounds like there are breaches that are meritorious and whether the losses are  sufficient to justify the trauma being involved in a lawsuit as well as the potential costs. Even if you're  doing it on a contingency and retainer, there are cost risks and so you don't sue for $50,000 of loss. You  go to the ombudsman for something like that. It's not worth the cost of the lawyers to sue for that. I  know it's a lot of money to a lot of people, but $50,000 compared to legal fees just isn't a good risk. 

Jason Pereira: I'm sure you get a number of complaints that are basically just my advisor lost me 10%. It's completely  within normal guidelines. I'm sure there's plenty of cases you come across where someone's discontent  and it's not necessarily a violation of the advisor's duty. It might be, but it might not be. [inaudible  00:33:35] so it's not just about losing money. It's about losing the money in the context of the grander  scheme of things really. 

Harold Geller: Absolutely, particularly if you have a down market like in March. When we got calls in March, unless  there was a clear technical breach of people who were more looking for, they were more sophisticated,  then we said follow your financial advice for a while and let's see what happens because in times of  volatility people get very nervous but they don't necessarily have losses and they don't necessarily have  claims. 

Jason Pereira: Fair. So one last question for you to add to this. We've discussed knowing the difference between good  and bad advice and what to do when advice goes bad, but unfortunately, the amount of due diligence  that the average person puts into getting an advisor I'd say is pretty slim to my experience, right? More  often than not, it's someone they know recommended someone that they're working with. Just because  that person's happy with that advisor doesn't mean that advisor is doing a good job. There's "Do you  know what you should know of that person?" The questions I have for you really, consumers listening to  this, what steps should they take when deciding to work with an advisor? What should they be looking  out for in terms of who they should be working with? 

Harold Geller: Well, this is a very difficult question and it should be. It's something which as an investor advocate I'm  very disappointed in the way I'm going to answer the question because I think that the investor is  entitled to clear and easily accessible... There are a few things which they can look to. First of all, they  can do Internet searches and particularly look at mutual funds, whether the Mutual Fund Dealer's  Association, if it's securities. Look at the Investment Industry Regulator of Canada, insurance, financial  services regulator agency in Ontario at least. Look at these regulators and see whether there are any  enforcement actions or decisions against the financial advisor. But also take a look at the firm that  they're associated with. Unfortunately, you won't see everything that is known to be bad about the  advisor, if there are things to be known, so that's a limit. 

Harold Geller: You can look at credentials. There are some credentials that indicate higher qualifications, higher  thresholds. And let's be clear, the threshold to become a financial advisor just without the higher  credentials is so low that in grade 13, I qualified. I never had a checkbook that I had to balance. I never  had a lease for a car or a house. I had never had a real job, and yet I could advise on investments. That's  how low the entry standards are and insurance isn't much better. So look for things like CFA, CLU,  although that's not a guarantee. Registered financial planners. Certified financial planners. These are  some of the qualifications which are a higher studying standard and actually a higher standard of  continuing practice. They're also people, that I just listed, that have planning backgrounds. Whether  you're looking for wealth planning, estate planning, retirement planning, financial planning, really what  you're looking for is somebody with good planning background so that they have the skills and have  shown the skills to independent third parties that they can bring to your particular future. 

Jason Pereira: I agree with all of that. It's interesting. You made a number of points that I want to kind of just expand  upon. The entire, look at the individual, not the firm. Too often, I like to say people get washed with the  logo. Really, in actuality, advisors run their own, more or less, independent practices, regardless of the  logo that's over top. As I always say, you could be dealing with the bank-owned brokerage, and you  might be dealing with the best guy they have or the worst guy they have. But they have the same  business card, so it's really hard to tell. 

Harold Geller: Let me jump in there for a moment. In fact, some of the worst financial planning that I've seen, some of  the worst service and some of the worst customer service following what is clearly breaches, is by the  biggest bank associated dealers. So logo is not in any way a marker of either service, qualifications, or if  there's a problem how you'll be treated. 

Jason Pereira: Actually, so it's interesting that you say that. First of all, thank you for that because it's absolutely true.  To my experience, we never lose people to those groups and we end up taking tremendous amounts of  business from them because you're absolutely right. At the end of the day, they're there to meet the  needs of the bank, which are not the needs of the client. Actually, the entire security aspect where some  people feel they're more secure for dealing with a larger institution, I actually say it's the other way  around. They're more likely to buy you in legal, lawyers and paperwork if you ever complain. 

Harold Geller: And they have the highest fees often. It's amazing how multimillion dollar accounts are being asked to  pay 1.5% for non-trading account, but something that is going to be a buy and hold strategy and yet  paying through the nose way higher than they have to if the client knew to negotiate the rate down. Just  it's terrible. 

Jason Pereira: More often than not, for lack of a better term, the inmates are running the asylum. It's the investment  guys running that relationship, not the planners. Really, they're there for one thing. Planning is the  freebie that they give you. Those planning groups are also incredibly restricted in some of the stuff that  they can say or not say because they can't contradict the advisor, right? So if the advisor doesn't want  their recommendation because it's going to cost them money, then [crosstalk 00:39:27]- 

Harold Geller: Sales channel, not the professional advice channel. 

Jason Pereira: Exactly. I could beat up on the banks all day. Maybe I'll do a special episode about that, but let's not go  that way. The other thing, it's funny... Just to give you some guidelines as to what we do as a best  practice in three specific ways that I think are valuable to consumers. 

Jason Pereira: One, we never make recommendations until we've done planning. Josh Brown out of the U.S. is a well known financial advisor basically said to make an investment recommendation without having a  financial plan is akin to malpractice, and that's one of my favorite quotes ever and I feel the same way. I  don't understand how anyone can make recommendations on investments without having a plan in  place and then having the investment policy statement, or just simply what that means in layman's  terms is this is how your investments are going to help you meet your goals laid out in the plan, how  those two things can not be done in conjunction before the money gets invested. 

Jason Pereira: Yet meanwhile, it happens all the time when we're in competition for business where a prospect will  come in and we'll give them that response, and they'll be like "Huh? The other guys listened me talk for  15 minutes and then said this is what I'm going to invest you in and pulled some sheet out of their  folder." We're just like does that make any sense to you after we just explained our process. And they're  like no, it most certainly does not. To those advisors out there listening to this, you're not actually  winning business because of that behavior, you're losing it. Frankly, it's just one of those rare instances  where doing the right thing... This is one of those instances in life where doing the right thing actually is  going to win. 

Harold Geller: Yeah, but Jacob you and I know, and your listeners should know, that often the financial advisor is not  required to do a plan, so they can get away with it and save a lot of money by pumping what they have  to sell. 

Jason Pereira: Yes. More often than not, or oftentimes, those plans are designed to do nothing but sell. They're  designed to sell insurance policies. I've seen that on countless occasions. 

Harold Geller: Yes. If they're promising a result, well nobody has a crystal plan. Not the planner. Not a financial advisor.  And not the guy who is some stock jock. They're just taking risk with your money. 

Jason Pereira: Agreed. And the other two pieces we give is that we always tell people that we have other clients who  are willing to act to basically act as references. We also, if they want to see sample financial plans, we  have those available. And lastly, we often get times, sometimes we'll get people where we're the only  person they've spoken to. And we'll say, okay, so your primary job is to go out now and talk to at least two other people before you make a decision because all too often, frankly, if you only talk to one  person, how do you know that person's any good, right? That's nuts to me. We'll even make  recommendations as to other credible people that they should consider or talk to. More often than not,  I think people are not used to that kind of candor and that kind of genuineness. Sometimes maybe we  won't win that business, but if they end up in the place they should be, that's really the goal. We'll be  fine in the long run. 

Harold Geller: [inaudible 00:42:25] professionalism is a sales advantage. What you're describing is professionalism. 

Jason Pereira: Yeah. 

Harold Geller: It's a great way of presenting your offer. If you're telling people the risk, if you're saying to them do your  own due diligence, check me out, then that is the mark of a professional. 

Jason Pereira: I wrote about it years ago. It was something to the level of disclosure of compensation should not be a  strategic advantage. Unfortunately, in the current industry it is. Simply stating... This is another piece of  advice for clients. If the advisor is not willing to tell you in full and complete, simple terms what it is  you're paying in percentages and dollars, and you basically have given that to another advisor, that  advisor doesn't basically uncover some sort of hidden fee that you were not disclosed, if you cannot  know with certainty what it is you're paying and they cannot look you in the eyes and tell you what it is,  something is wrong. Something is wrong. For those of us who basically are transparent about this, the  number of relationships I've destroyed with previous advisors by just telling people what they were  paying their advisor is astonishing. I often wonder how do you get up every day and avoid this  conversation. 

Harold Geller: I can tell you in financial planning, it's worth paying for financial planning. But if you're not getting that  financial planning, then it comes down to disclosure and competitor pricing. The compounding impact of  fees is the same as the compounding impact of interest, just the inverse. I have no problem with paying a higher fee if you're getting the full suite of services. Otherwise, you're just talking about trying to  reduce [inaudible 00:44:06]. 

Jason Pereira: That's it. Exactly. If that person, if that advisor, is just pointing to an advisor and telling you where to go,  you're better off with a robo-advisor. Comparing the price of a robo-advisor to a fully comprehensive  planner, there is a gap there. There is a definite margin. But that margin needs to be earned. Frankly, if  you're just the product salesperson hoping for that margin, something's wrong. Something's wrong.  That's not a lot of value to add, quite honestly. 

Harold Geller: It's unfortunate of the industry. 

Jason Pereira: Unfortunately it is, but hopefully things are changing, slowly. Harold, thank you so much for taking the  time today. I very much appreciate it. Where can people find you? 

Harold Geller: Well, there are only three Harold Gellers on the Internet. I'm not an astrophysicist, and I'm not in the  movies. But my website is W-W-W, financialloss, one word, dot C-A. And I'm at hgeller, G-E-L-L-E-R, at  M-B-C law, that's Mary, Betty, Charlie, law dot C-A. Thank you. 

Jason Pereira: Excellent. Thank you so much for your time. 

Harold Geller: My pleasure. And keep up the good work. It's very important that people become educated on the value  of planning. This is wonderful. Thank you. 

Jason Pereira: So that was my interview with Harold Geller. I hope you enjoyed that, and I hope you have a better idea  now of what separates a good from bad advisor. And if you are in a situation with a bad one, get out. If  you're in the market for a good one, hopefully this serves as a guide post. And if you're someone who's had the unfortunate happen to them with their advisor, Harold is a wonderful gentleman to speak to  about that specific problem. As always, if you enjoyed this podcast, please leave a review on iTunes,  Stitcher, or wherever you get your podcasts. Until next time, take care. 

Producer: This podcast was brought to you by Woodgate Financial, an award-winning financial planning firm  catering to high net worth individuals, business owners, and their families. To learn more, go to  woodgate.com. You can subscribe to this podcast on Apple Podcast, Stitcher, Google Play, and Spotify,  or find more episodes at jasonpereira.ca. You can even ask Siri, Alexa, or Google Home to subscribe for  you.

FPCBOJason PereiraLaw, Advice, Financial Planning