Those were the first words out of my mouth yesterday upon hearing an incredibly shocking story.
Scott and I had just finished up a meeting at Raymond James with an IT expert who was showing us a demo on some software that might make make some of our internal operations easier, when we stopped by to say hi to a business associate within Ray Jay.
To be sure, our business associate at Ray Jay we stopped in to say hi to is a very high-quality individual, so I believe what he told us. Here goes. And to be clear, I am not making any of this up.
Our guy at Ray Jay was talking to an unidentified Portfolio Manager (PM) at a firm registered in BC. This PM said he would do stock trades with Ray Jay, on behalf of his clients, but would want a "kick back" of sorts.
The proposal from this PM (I could use several other adjectives for this guy but they wouldn't be appropriate for our family-friendly website) was that he wanted to "add on" to the stock trading commission that Ray Jay charged his firm so he would be charging his clients more.
Here is how this PM's proposal would work:
To which I replied, "You've got to be kidding me?". Nope, that was the fact. And this PM said the British Columbia Securities Commission said it was "ok" to operate this way! Really?
Guys like this give the financial services sector a bad reputation.
But in the end, the clients would have no idea that they were being charged an extra $.02/share. How would they? What a joke.
As a PM registered with the Ontario Securities Commission (OSC) and in BC, Alberta and Sask, I would be shocked if a regulator said this form of business practice was "ok". And even if they did, what PM would actually do that?
As a PM in any jurisdiction in this country, we have a Legal Obligation to operate with a Fiduciary Duty to our clients. This means putting our client's interests ahead of our own at all times. How does over-charging your clients put their interests ahead of your own?
Stories like this are just part of the reason why we created Our Voluntary Code of Conduct for the Stewardship of Your Wealth (read here if you haven't already: highrockcapital.ca/uploads/3/4/2/5/34254660/our_voluntary_code_of_conduct_as_stewards6.pdf). The first two are extremely important, certainly in relation to this story we heard yesterday:
1) Put our client’s interests ahead of our own
2) Be transparent and forthcoming about fees and costs and their impact on your portfolio
Last thing, before I sign-off on this topic, that clearly has me worked up into quite a state, below is a full explanation of our High Rock Private Client Fees:
And for further clarity, let me add:
Well the OSC, nor their other provincial counterparts, may not think full fee disclosure is all that important, but at High Rock, we do, and we have gone above and beyond the regulatory requirement to help educate our clients and prospective clients exactly what they are paying, what we are making and what anyone else involved is making.
Here it is: