Credit card fees – revisted

I think it is reasonable to assume that most Canadians are now aware that the Competition Tribunal tossed a complaint about the excessive fees being charged by credit card issuers (mainly our big banks) and the impact of those fees on small business and consumers. Even more interesting is the fact that the reasons for the decision to dismiss the complaint are being withheld from the public! I wonder what the Tribunal is trying to hide? Is that “independent” Tribunal really in place to protect consumers and small businesses or rather large financial institutions?

As I commented in earlier blogs, nothing in life is free – including the use of credit and the accumulation of “rewards points” or other forms of loyalty incentives. Everything has a cost, and despite what some governments and tribunals claim to the contrary, there is only one payor of these fees and that is you and I – the ultimate consumer of everything produced in our economy.

Somehow, these large institutions (that make somewhere between 5 and 7 BILLION $ per year from Canadians paying these fees) managed to convince the Tribunal that this was in the “best interest” of Canada and Canadian consumers! It must have been very creative and ultimately persuasive and maybe that is why the Tribunal doesn’t want to release all documentation to us. Good heavens, we might even be able to draw our own conclusions that we are being ripped-off and no-one is prepared to take a stand.

I am not a fan of government intervention, but the voluntary code introduced some months back by the Federal Government, hasn’t done anything and maybe the code should become law.

Can a single advisor handle it all?

So far in 2013, there has been a lot of discussion about the potential for “one-stop-shopping” either through advisors or through certain financial institutions. This begs a basic question in my mind – can any one advisor or any one FI properly handle all of the financial matters for a client?

From the perspective of the FIs, they would like the public to believe that they can, in fact, handle everything through in-house advisors or a team of advisors. Does this claim stand-up in the cold light of day? I suggest not. Financial planning, in all of it’s complexities and forms, is based on a close personal relationship between the client and the advisor(s) involved. FIs suffer from a few issues in this regard including lack of continuity, perceptions of conflicts of interest in products and services recommended – predominantly in-house or house-labelled generic products – lack of objectivity also springs to mind.

So what about the individual advisor? Currently we have two versions of this creature on the loose – the independent group (the largest in numbers) and the closely-tied (or career) advisors that represent one company (maybe with one or two strategic alliances to flesh-out their potential offering). I will offer some comments on the latter here. Everyone knows that no one company – regardless of size and breadth of offering – can be all things to all people at all times. Assuming that you accept this premise, the ability of the closely-tied advisor to hande all matters is obviously seriously impaired as is their ability to claim to offer independent and objective advice on all matters financial.

So what about the independent advisor? Can they fill these gaps? Again, I have to say no. While the vast majority of these advisors seem to stress their ability and talents in this area, at best they make broad-brush attempts – albeit very well meaning – but still fundamentally lack the knowledge and full product and service suite.

Is there a solution? I believe the answer here is YES. I believe the answer is what I call “strike teams”. Stay tuned for my next blog where is hare this concept in more detail! Cheers