Misleading Advertising for Investments and Insurance

 
  A Sarcastic View of the Trade Between Those who Have Money and Those who Want Money.




We are now in the thick of RSP season in Canada and with that comes the ramped up advertising to get your savings deposits before the deadline. So with this in mind I thought it would be best to share some less than truthful advertising gimmicks of getting your money into their accounts.

1. The hook - Up to 3.5% a year RSP.
     What this sounds like - Wow, I could get 3.5% on my money over the course of 2012!
     What this really means - First, please understand that an RSP does not pay interest. The investment in the RSP pays an interest, or loss, or flat etc. This advertisement is a sales ad by a bank for GIC's . They don't care if it is an RSP or just a regular savings account. Banks sell GIC's...alot! You could get 3.5% in the fifth year of a locked in 5 year GIC if you put that GIC into your RSP this year. Actually, you will probably get a much lower rate this year, maybe 2%, moving slowly upward into your fifth and final year assuming the prime rate in Canada moves in that direction.
2.  The hook - Open an online trading account and receive 5 free trades.
     What this sounds like - 5 Free trades.
     What this really means - is that it is possible to grow money this way assuming you have the expertise, emotional control and judgement, but most likely what most people should read into this is "once your 5 free tades are done, and your money already much lower, we will begin charging you $27 per trade". Enjoy.
3.  The hook - "I no longer doubt my investing skills"
     What this sounds like - Your now a investment genius. You have mastered the art of economics, analytics, mergers, aquisitions, hedging, swaps, derivitives and can now probably become a sugar commodity broker buying forward contracts.
    What this really means - See #2.
4.  The hook - "...with no medical. Get up to $250,000 coverage for as little as a dollar a day.
      What this sounds like - I'm 56. You mean I can get 250k in life insurance for $30 a month even with my high cholesterol?
      What this actually means - If your 22, you can get 250k in insurance for $30 a month...maybe. If your 56,  with high cholesterol - forget it! Not for 30 beans that's for sure. Besides, how many 22 year olds really need to purchase medfree life insurance anyway. Most are in great health and can get better rates from another underwriter.
5. The hook - Same returns, less risk
    What this sounds like - the holy grail of investing.
     What this actually means - (This ad is referring to bond mutual funds which have had a similar return to stock mutual funds over the course of a two year period I believe, 2010-11' I think.) Until you look at the bond market upheaval which left Greece bondholders in its wake, and continues to be the catalyst for both the borrowing and capital markets on this planet. They are not talking about Canada Savings Bonds people.

  In summary, your best provider of insurance and investments is a broker. Understand what your buying, who's managing your money and ask lots of questions.


Shawn Lariviere, FMA
Rowe and Mali Wealth Management Services.