How to Pay Less and Save More For Yourself: The Essential Consumer Guide to Canadian Banking and Investing Paperback – Dec 26 2006
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About the Author
As the personal finance columnist for The Globe and Mail, Rob Carrick is one of Canada’s most trusted and widely read financial experts. He is the author of two previous books and lives in Ottawa with his wife and family.
Excerpt. © Reprinted by permission. All rights reserved.
Banks, mutual fund companies, and investment dealers are among the most successful corporations in Canada, and they have you to thank for it. Yes, it’s your hard-earned money that made these companies what they are today. Add up all the fees you pay to your bank, fund companies, and financial adviser and then combine them with the money paid by other clients. The resulting flow of multi-billions in annual revenue makes companies in the financial sector among the richest in Canada.
This calls to mind an often-told story about a self-important investment adviser who was visiting a marina with a friend and showing off the fancy boats that he and some of his fellow advisers owned. “Nice,” said the friend, “but where are all the clients’ boats?” Let’s be fair – some people do get rich with the help of the financial services industry, and just maybe they get to float their boats with the big guys. As for the rest of us – well, let’s just say there’s a monetary imbalance between what the Bay Street brigade is pulling in and what’s left over for us. You’ll see it in those bank accounts that pay zero interest while raining down fees, in mutual funds that never seem to make as much money for you as they do for the companies that run them, and in the services of investment advisers who worry less about your financial progress than their own. The whole idea behind the financial services industry is to make money by helping you make and manage your money. It’s a totally valid model, but not always a fair one in real life.
This book is your road map out of the dysfunctional relationship that too many Canadians have with the financial industry. You need banks, fund companies, and advisers as much as they need you, so I’m not advising you to stuff money in your mattress or adopt any similarly crazy strategy. Rather, the point is to give you the information you need to bring equality to your relationships with providers of financial services. In other words, give you the tools to get the most from banks and other financial services companies while paying the least.
Years ago, the idea of questioning the cost and quality of the products you bought from a bank, broker, or fund company would have seemed absurd to the vast majority of people. I remember going to the bank for my first mortgage in 1993, and waiting to be told what interest rate the bank would deign to offer. I also recall a meeting with a broker a couple of years later at which I was told exactly what I would be investing in and exactly how much it was going to cost. In both cases, I didn’t know enough to question what I was told. Even if I had known, it would have been explained to me – oh so politely – that if I didn’t like the deal, I could shove off.
Today, you don’t get quite the same treatment. The Internet provides a lot of information on rates and fees, so most financial service providers can’t treat you like a complete ignoramus (a partial ignoramus, yes). Also, competition is so intense between banks, fund companies, and advisory firms that everyone now recognizes the need to provide a certain degree of forthrightness and respect. Still, we have not yet arrived at a level playing field, to use a cliché favoured by those on Bay Street. While there are all kinds of great deals out there in banking products, mortgages, funds, and so on, you often have to know about them to take advantage. Example: Whereas it used to be a triumph to get a full percentage point knocked off your mortgage, today it’s often possible to get an even bigger discount. Don’t expect your banker to volunteer this information, though. Instead, you have to ask.
This book tells you how to ask for better terms. And if you ask and still don’t get what you want, it tells you where to go for a better deal. Here we arrive at one of the current key trends in financial services. While all of the big companies want to have a relationship with you – in other words, sell you lots and lots of stuff – the truly savvy individual has many relationships with many companies. I’m a good example. I have my chequing accounts with one bank, my savings account with another, my mortgage with yet another, and my main credit card with still another. Yes, it might simplify life to aggregate all of these products with one institution, but the net result would be to make that single institution richer at my own expense. That’s the opposite of what this book’s all about.
So, who am I to tell you how to deal with the financial industry? Let’s just say this book has been more than eight years in the making, during which time I have written a regular column on personal finance for The Globe and Mail, Canada’s national newspaper. I’ve spoken to hundreds of executives at banks, fund companies, brokerages, and financial advisory firms over the years, so I know how their world turns. At the same time, I have received (and, almost always, answered) tens of thousands of emails from readers asking questions and relating their experiences. I’m the guy in the middle, and I know both sides of the story.