Advisor makes no excuses for underperforming peers but says discount brokerage's ad campaign is deceitful spin
Questrade has been the bane of financial advisors’ public image for years. Who doesn’t squirm in their seat when, commercial after commercial, the profession is attacked as a smug rip-off?
One advisor has had enough of the discount broker’s assault on the value and cost of advice. Jason Pereira, partner and senior financial planner at Woodgate Financial, recognized Questrade's place in the industry but slammed the firm’s “deceitful” ads as full of empty promises.
Pereira said its marketing campaign is right to attack advisors who get paid to provide little to no service but said it fails to acknowledge the fact advisors can have a net positive impact in excess of fees charged. Specifically, Questrade’s “30% richer” promise is dismissed as one it “cannot realistically make” and one it is “failing miserably” to deliver.
He said that, rather than feel threatened by roboadvisors or discount brokers, there is a place for all of them in the wealth management spectrum. After all, investors want different things. “People who use laundry services are not worse or better than those who launder their clothing themselves,” Pereira said, adding that for those who want to speculate or DIY their finances, a discount broker is the place for them, while robos make investing more accessible.
He said: “My focus is on comprehensive planning for complex client cases, not just investing. So technically, I am not even in competition with Questrade, nor have I ever lost a client to them. So when I take issue with Questrade, it’s not because I feel threatened, it’s because I see the ‘holier-than-thou’ stance in their marketing as simply self-serving – if not outright deceptive.”
Running a DIY portfolio without professional knowledge has natural pitfalls: not identifying risk tolerance, failing to adhere to modern portfolio strategy, and not diversifying among them. This opens the door to rampant stock-picking, with huge risks in volatile times. But that does not excuse some of the holes in the financial advice profession. Pereira conceded there are too many out there with few or even no qualifications providing no service beyond picking random mutual funds, providing no advice or support, and not contacting their clients, all while collecting deferred sales charges and trailers.
“For that matter, there are entire firms that have created structures and incentives to promote exactly what those advisors are providing,” he said. “As far as I am concerned, for investors with those advisors, please move to a roboadvisor or get real advice from a qualified advisor. Questrade has been right to call out that segment of the advisor body in their ads – just like we all should.”
At the heart of its stinging ads is fees – and the accusation that advisors are over-charging for what clients get. The Toronto-based advisor says where this argument falls flat on its face is the painting of all advisors with the same broad brush of providing little to nothing for what they charge. By picking on “investing” as a commodity, they don’t embrace the whole picture, according to Pereira.
“While I can provide countless examples from my own practice showing how I've saved clients a virtual fortune in tax, prevented them from blowing themselves up with risky, ill-advised investments - bitcoin, anyone? - advised them in the complex sale of their business, or guided them through countless life events, divorce, remarriage, adoption, death, birth, career transitions, business succession, blended families – you name it, let me instead turn to the evidence.”
He pointed to Vanguard’s Advisor Alpha, Envestnest’s Capital Sigma, Morningstar’s Gamma, and Cirano’s Gamma as proof of how advisors can add value to their client’s portfolio, up to 3% a year. All, however, acknowledge that the exact ROI on certain aspects of a planner’s advice is almost impossible to quantify. “Whether the real value of an advisor is 1.5 or 3 per cent on average, the key point is that it’s positive – which Questrade outright fails to acknowledge.”
One line from the advert really stuck in Pereira’s craw – “you’re not still investing with mom and dad’s guy are you?” He said this fails to take into account the benefits that client’s family may have enjoyed because of that advice. “While some of their ads raise valid questions, this one – in my view – is just outright insulting, insinuating that there’s nothing ‘mom and dad’s guy’ can do to justify their costs. And hey, it’s not cool to make such a reductive argument; it’s actually embarrassing.
“When the goalposts are drawn solely in the investment realm, Questrade, you have a point. When you realize that investing only makes up one part of what comprehensive planners do, your advertising not only loses validity, but it comes off as deceitful – given that you, no doubt, understand this less-than-subtle difference.
“I don’t buy for one minute that Questrade doesn’t realize the differences their advertising is failing to mention. In fact, I’ll go further: I think their advertising intentionally dismisses and leaves out ‘the rest of the story’ and or self gain.”
This, of course, calls into question the value of advice. It also harms DIY investors who run into trouble and decide not to then go with a professional because of the message Questrade has repeatedly put out there about fees.
Pereira said: “In the end, there is a place for the services of discount brokerages, just as there is a place for advice. The market should be as diverse as the needs of consumers.
“My advice to Questrade brass, if they end up reading this: cut the bull. Be honest. You want to target the advisors who are selling hamburgers marketed as steaks, go ahead.
“But don’t go telling everyone that all steakhouses are only selling hamburgers. Cutting costs will get you so far, but in the long run when your only value proposition is price, you’re susceptible to being undercut – and losing the only value prop you have while simultaneously making your consumers averse to services that could make them better off.”