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Canoe Chat with Stan Buell
Canoe Chat - Wednesday, March 29, 2000
Stan Buell Chat
Moderator: We're underway now, talking with Stan Buell of the Small Investor Protection Association. He'll be fielding your questions on how to protect yourself in the investment market.
Moderator: Stan, over to you for an opening comment.
Stan Buell I appreciate the opportunity provided by CANOE. SIPA is a non-profit volunteer group established to help individual investors protect their investments.
Lucy Bangle: How can I purchase IPO shares? I have an account w/CIBC Investors' Canada and wish to purchase selected co. IPOs I liked, but it seemed almost impossible. Must I open an account w/a company that deals w/IPO, i.e. DLJ, Friedman Billings, WIT, etc? Please help. Thanks, Lucy Bangle
Stan Buell Purchasing IPOs is difficult for the small investor as these tend to be made available to the larger accounts. One should exercise caution with IPOs and have researched the particular company. If you do want to purchase IPOs you should talk with several brokerage firms about this.
Terry: Can a retired person (55) get "Life Insurance" on a mortgage? How do I get info on using my RSP's to purchase a mortgage after retirement?
Stan Buell SIPA does not provide specific financial advice but has a mission to provide general information to investors and to provide guidance to those with a problem. You should check with your bank or investment advisor about mortgage insurance which normally covers the amount of the mortgage only. You may want to consider term insurance for the protection you need. Your banker should be able to tell about the possibility of providing your own mortgage through your RRSP.
Anonymous: Hello Mr.Buell, I wish to know if a person should stay with Investors Group or go to a smaller company named Geoffrion, Leclerc, Marcous & Assoc. They are out of Sillery, Quebec. As well, is it more advantageous to do one's own investing over the Internet where we would not have administration fees? Thank you for your reply.
Stan Buell There are many choices for financial advisors and it is important that you understand what your advisor is saying and that you are comfortable with what he says. You should consider companies and financial advisors are properly registered and insured. It is also worthwhile to deal with companies that can sell you a range of products for diversification. Some bonds are a good idea for many. With regard to Internet investing, you should keep in mind that investing is for the long term, whereas short term moves tend to be more of a gamble. While discount brokers offer reduced commissions, they do not offer advice. If you are an experienced investor and trade a lot then a discount broker and the Internet may be appropriate for you. Some brokers offer different levels of service all available on the Internet.
Anonymous: Stan, Are brokerages at all liable for the time lag between placing a market order and its actual fill? I don't have access to realtime quotes, and I'm kind of taking a gamble everytime I make a trade. With these guys signing on new account holders left, right and center, aren't they in some way responsible for the congestion in online trading? Shouldn't they be held accountable?
Stan Buell With the move to discount brokers and Internet trading, most of the firms are unable to keep up with the flow of orders. This does make it risky for those who are trying to actively trade using these services. Day traders are able to take advantage of real time services at a cost. I think most average investors should exercise extreme caution in trying to make short term trades. They would be well advised to indicate precisely the price they will pay when buying, and the price they will sell for when selling. To enter a market order on all except the very high volume securities is risky. The subject of liability is a question that has come up and this will have to be resolved by the regulatory agencies or legally.
Andrew: With all the different methods of receiving payment, are (financial planners) required to explain how they make their living to their clients?
Stan Buell Some financial advisors provide advice for a fee and do not receive commissions. They generally provide services for larger accounts and the advice should be objective. Most small investors do not want to pay for advice and rely upon financial advisors who are rewarded by the companies whose products they sell. Not all financial advisors are able to remain objective under these circumstances. That is why one must have some knowledge of how the industry operates and make appropriate inquiries. The Ontario Securities Commission and the Investor Learning Center provide worthwhile information. You can access their website through links provided on our website at www.sipa.to.
Tom R.: If a company goes bankrupt, is there a way I can reclaim my lost stock value?
Stan Buell Investors should verify that the company they invest with is covered by the Canadian Investor Protection Fund or some appropriate insurance that will cover them in the event of bankruptcy. If the principals of these companies have any resources that are not squirelled away out of reach, civil litigation would be a recourse. There is a problem when the value of the security was determined by the bankrupt company through their marketing. In this case, the value of the security could be zero and no insurance will protect against that outcome.
Jim MacCabe: Is there any chance that the CIPF will raise the $60,000/$500,000 limits anytime soon?
Stan Buell My crystal ball does not provide me with an answer on that, but the limit I believe is not so important as the application. With the limit, one can diversify with different firms; the real danger is that the coverage does not apply to a particular situation.
Steve: Hello, Could you please provide some information on the remedies available to the small investor ... when a brokerage house totally mismanages the investment, and doesn't follow the investor instructions. What channels are out there to make them sort out the mess? Thanks.
Stan Buell When a client has the perception that their account has been improperly handled by a brokerage firm, they should seek some professional advice to determine what the problem really is. With that knowledge they should approach the brokerage firm. In some cases the brokerage firm will resolve the issue. If the firm does not resolve the issue but they are a member of the IDA, an arbitration procedure is available provided certain requirements are met. A complaint to the regulators may result in the financial advisor being disciplined, but will not provide restitution. We believe this should change, but that is unlikely to happen unless there is an independent regulator. There are some in the industry who try to run their businesses responsibly and to look after their clients properly. If you have a problem and the firm fails to rectify it, then you should contact the regulators.
Harold H.: What type of complaints are there against online brokers? Are there some complaints that have a greater success rate than others?
Stan Buell Most of the complaints we hear are lack of timely response to orders to buy or sell. The volume of business that has been generated recently has caused a serious deterioration in the level of service of some of these brokers. It is too early to know which complaints will have the most success. Investors should be aware of the weaknesses of the systems and the limitations. In some cases you are unable to utilize services that are normally available with a full service broker. I would suggest that it is better to take action to avoid the possibility of needing to make a complaint. The complaint resolution process is one of the major issues we are faced with today.
Peter Linnell: If you have a full service broker but do most of your investing without his advice or input, what amount of discount off the commission should you be entitled to?
Stan Buell Most larger accounts and investors who make their own decisions will be offered discounts by the full service brokers. Some brokers offer the possibility of different types of accounts so that you can operate a separate account and do your own trading at reduced commissions. Ask you broker what services he offers and check with a couple of others and compare.
Edwin: Due to a timing error I ended up with one share of investors Group in my RRSP account. How can I get rid of this $16 share without paying a $29 brokerage fee?
Stan Buell If you have any residual in your account, it could be due to a technical error. These would normally be rectified by the brokerage firm without any charge.
Moderator: I'm afraid that's all we have time for today. CANOE would like to thank all of you who submitted questions, and Stan for joining us today. Keep checking CANOE's chat lineup at our Chat homepage, and Money will be bringing you another chat next week. Stan, any closing comments?
Stan Buell Thank you for the invitation to participate in your Chat Room. SIPA has now grown to over 200 members across Canada. Our members have experienced most of the problems that investors can encounter and we are able to draw upon the experience of other investors to help the small investor. We would like to see some changes in the industry so that the complaint process mechanism is revised to encourage all of the industry to look after their clients that suffer loss due to breach of industry rules and regulations. Unfortunately that is not the current situation. We invite the public to access our website at www.sipa.to. It provides information for the small investor and links to other websites including Canoe.
Moderator: Thanks again Stan, and to all who participated.
Reprinted from Canoe Chat
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