Saturday, March 24, 2018

Never Invest With Your Bank

Whether it's good advice or not I tell my kids that the bank is a great place to get money but the absolute worst place to leave your money.

Banks are all staffed by kids these days and full of turnover. On the rare occasion I step into my home branch the faces are constantly changing.

I mean nothing against the young but what do they know about money, working, saving and investing.

These are salespeople just pushing products that the bank needs them to sell. Once your account is opened it needs to keep selling you credit cards, lines of credits, education savings plans and mutual funds. Need a mortgage?  Got that too.

Nothing wrong with any of this, just be advised that you are not getting good advice on any of this wealth building stuff. Banks charge some of the highest rates on investment products on the planet.

I use a bank to get money I don't have and to open a direct investing online account. That's it.

I never buy anything from the bank. NOTHING!

I own bank stock but you can't buy that from them. Want to purchase an ETF because it's cheaper? No can do, only expensive bank specific mutual funds.

The Deception

  • banks employ salespeople NOT advisors
  • their needs are different than yours
  • conflict of interest sales practices
  • not enough training and experience of sales staff
  • they are a front for institutional products only
  • they are in the business of making money and NOT making it for you
If you want to take advice from people who work at a bank on what investments are good for you, go ahead. You have been warned. They just sell high priced stuff and make commissions. Know the difference. Just because it's your bank don't be blinded by years of loyalty that they really care and are looking out for your best interests. They are NOT!

Mutual Funds are yesterdays DoDo bird.

Where Should You Go?

If you're looking to invest in a TFSA, RESP or RRSP just stay out of the bank. Seek out a fee-based financial advisor. One that is going to give you unbiased investment advice who is NOT compensated by company specific products.

Find somewhere you can also get some retirement planning advice and tax advice as it applies to your family situation.

Start asking friends and co-workers for recommendations. Just research who and how much they charge. Keep costs low.

If you want to go it alone as I do then you need to read and research starting with all of the books I recommend or have recommended.

Stay away from mutual fund companies and accounting services who also sell insurance products you don't understand. Your downtown is probably full of these store fronts. Don't go inside or they will skin you.

My Experience

I went from mutual funds sales guy friend to DIY investor. I just feel better doing it on my own. I just never had enough money for any of them to take me on.

For the majority of us small people the advisor landscape doesn't take on small accounts so it's buy a balanced mutual fund or ETFs on our own. This is easy to do.

I also buy individual stocks in another account which I find is also fun to do. I like to research stocks and find companies to invest in.

It is also exhilarating to receive monthly/quarterly dividends.

So I invest money in a variety of ways. I index in a balanced portfolio for my wife (still working) and individual stocks in my own RRSP (now retired). This is the lowest cost way of investing that I know.

It's NOT for everyone and may not be for you.

Do your research, read books and use Google. There is so much free advice out there. You can do this, just stay out of your bank.

Related Post:

The 60/40 Balanced Portfolio - Is It Best For You?

Recommended Reading:

Del Vicario on Growth Stocks

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