10/31/2014 01:46 EDT | Updated 12/31/2014 05:59 EST

Actually, You Might Be Poorer Than You Think

Shutterstock / Gajus

Watch your wallet -- you may be poorer then you think.

Recently, CIBC announced that it was going "all in" on wealth management.

Basically what this means is that CIBC seems to be making wealth management the core of the bank's growth strategy.


A lot has changed since 2008 and traditional banking is not as profitable as it used to be. Notwithstanding all the other profit centres that banks have been involved with over the years, wealth management is seen as a safe, steady and predictable.

Most adult Canadians have some type of retirement savings. As more people are pushed out or defined benefit pension plans they are forced into either defined contribution pension plans or RRSPs. Going forward the vast majority will be dealing with RRSPs.

What this means is that the majority of you will be responsible for your own retirement savings and that you will have to make the decisions regarding the investment of those funds.

As I mentioned in a previous blog, according to a report commissioned by the federal government most Canadians are financially illiterate. In others words, most people have no idea how to invest retirement savings and therefore turn to perceived "financial experts" -- usually the banks.

The problem, as I see it, is that there is still little in the way of controls put on financial institutions regarding fees. Every major bank in Canada knows this which is why they are (collectively) the number one seller of mutual funds. These wealth management money machines provide the banks with safe, steady and predictable income.

You notice I said it provides the bank with safe, steady and predictable income, it will never provide you with safe, steady and predictable income. This is all about the banks, not you. Banks are retail and exist to make money for stock holders, not clients. The more products they can sell you, the more money they can make. That's why they're focusing on expanding their wealth management services.

What you need to know is what they're charging you. Regardless of what type of investment products you're using, you should always know what it's costing you to have your money managed.

As it stands right now, financial institutions are not required to disclose how much they are actually charging you. I'm not talking about black boxes like management expense ratios (MERs), I'm referring to how much are they actually charging you. Supposedly this is to change sometime around July 15, 2016 but until then you should watch your wallet.

If nothing is done to reduce the fees institutions are charging for investment management services most Canadians are going to be poorer then they think.


  • Calculate your outgoings
    Calculate your outgoings
  • Then calculate your outgoings
    Then calculate your outgoings
  • And you're left with what you can spend..
    And you're left with what you can spend..
  • Make sure to get home insurance
    Make sure to get home insurance
    So you don't have to pay out huge, unnecessary sums if you get burgled (fingers crossed you aren't!)
  • Budget tools
    Budget tools
    altrendo images via Getty Images
    Download a budget tool app to help keep track of your costs and potential savings. A good idea is to check your bank to see if they have one.