Alleged bad advice from a financial planner at a Canadian bank may have cost a retired couple almost $50,000.
The alleged facts were recently reported in the national news and the story offers two lessons. One for the bank and one for the investor.
A couple reportedly wanted to move approximately $200,000 from an American savings account to their Canadian RRSP and two competing banks had recommended against the transfer indicating it would require paying significant taxes in both the US and Canada.
Another Canadian bank’s financial planner, however, reportedly recommended the transfer be completed, indicating it was possible – but there would be a 20 per cent withholding tax.
At this point in the story the financial logic becomes weak. In our opinion, both bank and investor where at fault.
Apparently, the clients questioned the advice that was contrary to that of other banks.
The couple reportedly had been told the bank was such a large organization, it could do things others could not.
That was ridiculous.
Shame on any financial planner for saying it and shame on the investor for believing such a thing, and shame on any investor believing such a statement.
After the transaction, the investor reportedly received large tax bills from both countries and some of old-age security pensions were clawed back.
The couple apparently lost close to $50,000.
To say they were angry is an understatement and they pursued this with the bank that recommended the transfer. An institution they had dealt with for 30 years.
At the end of last year the bank reportedly offered the couple almost $19,000 as an appropriate level of service had not been provided.
The couple did not find this fair and went to the media. The bank apparently increased its offer – $50,000. The actual loss to the retirees was $47,000.
The significance of this story is it provides the opportunity to learn from mistakes.
It could have been a case of a bank staffer being untrained or unsupervised, or both.
It could have been a case of a bank financial planner wanting to sell an investment and earn a commission not disclosed to the client.
The bank was slow to adequately respond to the complaint.
The bank gets a failing grade as does the client, who’d apparently had advice from two banks not to proceed.
There is a responsibility of buyer beware and a red flag should have gone up. In hindsight, the clients could have done a better job protecting their interests.
Financial transactions have serious ramifications for both financial institutions and their clients. Both should be on guard to ensure each is assuming their responsibility to understand what they are doing.