Security of Your Assets (CIPF Insurance)

You do not need to use a bank financial advisor to enjoy the protection provided by the Canadian Investor Protection Fund (CIPF).

The CIPF was established by the investment industry to ensure that client assets are protected.  The limit is $1,000,000 CDN for any combination of cash and securities. Most investors will have two accounts—a general account and a retirement account —that are each eligible for $1,000,000 coverage.

Besides a Bank, What Are My Options?

There is a better option for investors seeking unbiased and objective advice – registered portfolio managers.  Registered portfolio management companies do not actually hold their clients assets, rather, the assets are deposited in their name at a Canadian bank.  In this capacity, the bank is used as a custodian to safeguard the assets.  All the accounts are covered by CIPF insurance.

Portfolio managers work for their clients, not the banks.  Unlike bank advisors, they have a legal fiduciary duty to put their clients’ interests before their own.  To be registered as a portfolio manager, one must meet the highest education and experience requirements in the industry.

The Best of Both Worlds

When you work with a registered portfolio management firm, you will be working with a fiduciary that will always put your interests first, and you have the complete security of knowing your assets are covered by CIPF at a Canadian bank.

Canadians and Their Banks

Most Canadians have a long standing relationship with their bank.  Many of us opened bank accounts as a child, depositing savings from a summer job, or the windfall received from a lost tooth.

In the 1990’s, the Canadian banks decided to get into the investment management business in earnest.  To do so, they went on a buying spree.  They purchased independent investment brokerage firms, and before long, the banks dominated the Canadian wealth management industry.  This strategy gave them the opportunity to cross-sell products and services to their existing customers.  You may have on the receiving end of this yourself.  Has your financial advisor ever suggested that you consider some insurance?  How about a new line of credit or mortgage?  That is cross-selling.

Conflict of Interest

The problem is, when your financial advisor is working at a bank, they work for the bank first, and you second.  The advisor will be under tremendous pressure to meet their sales and revenue targets – and that can impact the objectivity of their advice to you.  This creates an inherent conflict of interest.  It is not in the financial advisor’s interest to recommend an investment that doesn’t pay them well – even if that investment might be the best one for you.

Questions?  Feel free to contact us here.




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