How Canada’s Banks Let Canadian Investors Down: Part 6 of 7

Can This Really Be Happening in Canada?

Many ScotiaBank clients walk into their banks every day, looking for investment options.  The bank’s friendly staff sell ScotiaBank’s brand of actively managed mutual funds.  The advisors doing so are like salespeople flogging milk chocolate, potato chips and ice cream, while hugging the unsuspecting customers at a health food store. 

Sadly, the average person walking into ScotiaBank isn’t aware that your local branch has more in common with the WalMart junk food aisle than it does with the Dairy and Produce section.

The bank makes more money selling candy than they make selling fruits and vegetables.  So what do you think they sell?

Of course, you can always find some 90 year old geriatric who credits his longevity with an hourly cigarette, four beers a day, and an aversion to exercise.  But can you really be that guy?

Let’s just use the actively managed Canadian mutual funds offered by ScotiaBank as an example.

These funds invest in Canadian stocks.  They have really smart fund managers at the helm who buy and sell Canadian companies…trying to gain an edge for their investors.

If the markets get too expensive, sometimes they sell some of their stocks.  If there’s dire economic news on the horizon, sometimes they do the same.  Their job, as the sales pitch goes, is to maximize your wealth potential, while minimizing risks.

Here’s what the bank wants its customers to assume:

The past ten years have seen ample opportunities for such fund managers to take advantage of stock swings.  During the financial crisis of 2008/2009, these experts sold stocks before the markets fell.  After all, with their pulses on the economy, they have the skill to do so.

And if they see some new, potentially incredible stocks that the average person hasn’t identified yet, they can scoop some of those stocks for their fund.

It all makes sense, in theory.  But your odds of living to 100 on two packs of cigarettes a day are about as good as their forecasting and trading ability.

Unfortunately, Scotiabank’s fund managers have no such skills.  And the bank charges its unsuspecting clients hidden fees that erode their clients’ potential returns, while making bank shareholders rich.

Ten years ago, let’s imagine that you decided to open your own mutual fund.  You collected money from friends and family members, and because you knew nothing about stocks, you just decided to buy every stock on the Toronto Stock Exchange.

You weren’t skilled enough to pick stock winners.  Nor were you skilled enough to know where the markets were going to go over the next year, five years or ten years.  You weren’t skilled enough to know that the markets were going to get hammered in 2008/2009 and you weren’t adroit enough to avoid stocks that had ominous looking futures.  You just bought every stock on the Toronto Stock Market.

However, you would have had a huge advantage:  a collection of fruits and vegetables, with no sugar, fat or arsenic added.  Sure, some of those veggies may have rotted.  But with no additional preservatives, you would have beaten ScotiaBank’s fund managers so badly that they’d hide their heads in perpetual shame if the truth were ever nationally broadcasted.

How did the high paid folks at ScotiaBank’s Canadian stock mutual funds do over the past decade?

According to the data at, every single one of ScotiaBank’s funds lost to the Canadian stock market index over the past decade.

All of them?  Yep!  Every single one.

The bank disappointed its mutual fund investors, as has TD Bank, CIBC, The Royal Bank of Canada and the Bank of Montreal.

Each of these banks share the same conflicts of interest.  And it hurts the investment returns of hard-working Canadians.

For kicks, let’s elaborate on our former assumption that you bought every Canadian stock on the Canadian market, ten years ago. 

Now let’s compare how you would have performed, compared to the pros at ScotiaBank.

It’s the ten year chart that I’d like you to focus on.   The Canadian stock index would have turned $10,000 into $23,275 over the past ten years.  And ScotiaBank’s Canadian income fund would have turned the same $10,000 into just $16,697.  Check out this screen shot below:


I’m going to take you through EVERY SINGLE ONE of ScotiaBank’s Canadian stock market mutual funds to show you how poorly they have performed, relative to the Canadian stock index, over the past decade.  Look at each fund’s total return on the respective charts below.  You’ll see, in each case, the ten year return of the Canadian stock market outperforming the return of each, respective ScotiaBank Canadian stock fund.






In the world of investing, the Organic Dairy and Organic Produce are represented by a colourful display of index funds:  a green bond index; a darker green Canadian stock index; and a purple international stock index. 

I’ll show you how to open accounts of such indexes in the final instalment of this series.

Doing so will keep the junk food out of your diet.

To read more, buy one of Amazon’s top ranked Personal Finance books, Millionaire Teacher. 



Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions.

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38 Responses

  1. Canadian Banker says:

    Andrew, I respect your position and agree with most of your points. Actively managed mutual funds are indeed more expensive with higher fees than passively managed index funds or ETF's.

    However, I think that this misses the point. Banks are businesses and provide many different channels of service to their clients. More advanced clients wishing to gain access lower cost funds have access to these through discount brokerage channels. As bankers, we are encouraged to provide are clients with all the options available to them and will present this channel as an option as well. However, for new investors, people with no time to focus on asset allocation, people with no interest or no motivation to understand the stock market, and people that lack confidence in their investing abilities, actively managed mutual funds provide a way of introducing investing and building confidence for investors. Not only this, but people often forget that these funds are also part of a larger relationship that provides clients with access to advice, which helps people stay the course in the market it turbulent times. An additional benefit supported by the fees is convenience. Without the fees associated with the funds, the distribution channels used to sell them would not have the funding/resources to operate.

    The truth is, while expensive, many, if not the majority of actively managed funds, beat not being invested in the market at all in a given time period. Thus, for many of the clients that would never have invested, they provide a good starting point to investing. Actively managed mutual funds are like any other luxury product like vehicles or brand name clothing: many of the benefits are psychological and internal, but they are still real.

  2. Mark says:

    Scotia Canadian Income is a bond fund; how can you be comparing it to the stock market index? I agree, the product is too expensive, but the comparison seems to be wrong…

  3. Mark says:

    In the article you use TSX Completion Total Return, but it is missing 60 names which are included into TSX 60. TSX Composite Index would be the correct one to compare to.

    I agree with you message in general, but the facts are slightly off

    • Right you are about the Canadian Income Fund Mark! My mistake.

      For a change, I decided to use something other than the e-Series Canadian stock market index, which I used as a comparison model on the other articles in this series. Even if I used the e-Series fund, the data would all point to the same conclusion.

  4. Stuart says:

    Another great article Andrew thanks. I would love to see you do a article on segregated mutual funds.

  5. Kim Duke says:

    Hi Andrew,

    Well first of all, thank you for writing this book!!! Like many Canadians, I've been-there-done-that with mutual funds, mutual fund advisers etc (many of them from banks as you've mentioned in this series) I hope your book hits the best seller lists and makes Canadians wake up to owing our own financial security.

    Question for you. Before I became an entrepreneur 10 yrs ago – I spent 15 working in Canadian broadcasting. I have a LIRA currently invested 100% in Canadian equity. Problem? The 5 yr return is -0.7% (yes – I am so thrilled with that) soooooo…I obviously want to transfer it away from the company it is invested with and move it (I hope) to a TFSA and an stock and bond index funds that is self-directed. What are the restrictions with a LIRA (I know I can't cash it – but can I move it to the TFSA?)

    Thank you!


    • Hi Kim,

      I'm sorry it took me so long to respond. I have asked a friend about your LIRA question–he's more of an expert on Canadian tax law than I am. I promise that one of us will get back to you. He may even answer your question directly, below.



      • Kim Duke says:

        Thank you Andrew! I've made an appointment with the bank to switch everything based on Mike's advice and heads are going to roll. Ha.

        I appreciate the great advice Mike provided – thanks for asking him…and oh by the way – you should chat with Canadian self-published author in Edmonton- he writes about retirement and has sold over 700,000 books himself…no agent…and loads of foreign distributorship.

        Love your book – have bought 5 so far and the damn list is growing.

        Thanks again!


    • Mike Holman says:

      Hi Kim. Andrew asked me to look at your question – interesting question.

      Generally speaking, you can't remove money from the LIRA.

      Here is an article which covers some conditions where money can be removed from a LIRA (note, it applies to Ontario, but other provinces have similar rules):

      However, you can sell your existing fund and buy a different one inside your existing LIRA.

      Another option is to transfer the LIRA money to another institution which offers the investment product you desire.

      This can be done with a registered transfer – here are the details for an RRSP transfer which is the same thing:

      Once the transfer is complete, you can purchase the new fund you are interested in.

  6. I do agree with you, Canadian Banker.

    But with the highest mutual fund fees in the world, the Canadian banks deserve to be fair to the clients who choose their funds.

    There are plenty of people trying to educate Canadian investors on this front. If we can make a small dent in the bank's reputations–showing Canadians that the Canadian banks have the world's highest fees–then with luck, the banks will lower their actively managed fees.

    If they cut their expense fees by 60%, they would still make profits for the banks, and they would better serve the public.

  7. Thank you Mike!

    Readers, if you don't know Mike Holman, he's the author at MoneySmarts Blog and he has written a fabulous book on RESP investing for Canadians, which you can order via his site. He even has a special on right now!

    I hope that helps you Kim.

    Thanks again Mike!

  8. Jeff says:

    Hi Andrew,

    I'm soon to be 50 years old and have been saving for 30 years with a financial adviser. After following like a sheep and having blind faith that my portfolio will eventually start to grow I came to realize I had to do something as it was nothing more than a savings account. I searched Chapters for a self help financial book and I am so fortunate that your book came up. It came in the mail last Thursday and I read it to the end that night. Boy I wish I had learned your lessons 30 years ago. However I can't change the past but I can impact my future by following your plan. I have already put the wheels in motion and will be taking control of my funds in the next couple days. I can't thank you enough!

    I gave your book to my 75 year old Dad to read. He like me is not happy with his managed portfolio. He has no pension other CPP and OAS and needs his hard earned money for he and my Mom to live on. My question to you is this. Does he use the same index funds that Keith in your book uses (keeping 75% in the bond index) or do you have a different mix for a person his age who is drawing on their funds.

    I look forward to your reply.

    I want you to know that I will be buying 5 more copies, one for each of my siblings.

    Thanks again Andrew


    • Hi Jeff,

      Thanks for the kind words about the book. I'm so glad that you found it helpful….that was really my main purpose for writing it.

      To answer your question, your dad could choose anywhere between 65% to 75% in the bond index, with the rest allocated in the stock indexes (like Keith).

      Great question! And I'm thrilled that your dad now has a plan that isn't going to bleed him in fees!

      If you have a few moments, and you have an Amazon account, I would love it if you could write a quick Amazon review. Here's the link, in case you have time:

      And if there are any other questions I can help you with, give me a shout and I'll do my best.



  9. Mark Telewiak says:


    My wife recently left her job that had a pension. When she left her job, she was given a few options with the pension money. The option we chose was to transfer to a LIRA (broken down into a transferable amount and a cash amount which will be taxed, but will also increase her RRSP contribution limit).

    We opened a TD Online account, and purchased TD e-series index funds with the transferred amount.

    The process is a little difficult, as the rep at the bank reps either in person or on the phone plays dumb to not knowing about the e-series funds and really what I wanted to do with the LIRA.

    You have the money transferred to TD – then open an online account. Then when the money is transferred to TD, transfer it to the online account – or if the rep was nice, he/she will setup the online account and give you that account number to transfer to. If you have over $25,000 to transfer – I'd suggest opening an account with TD Waterhouse as you won't have any annual fees.

    When the money gets transferred, it automatically gets placed in a money market fund. You can switch out of that fund immediately without penalty.

    The whole process in our case was completed within 10 business days. Just be firm with the bank, and you will get it done.

    Hopefully, you have the option to transfer your old pension into a LIRA still available to you. Your choice may have been time sensitive and no longer available.


    • Kim Duke says:

      Thank you Mark!

      I did transfer everything into a LIRA so your advice is very timely as well.

      I appreciate you taking the time to respond with some ideas – I'm meeting with my bank this week with the process from both you and Mike printed out.

      I have no problem dealing with anyone being difficult – they would have picked the wrong girl for that tactic!

      Thank you again – I appreciate it!



  10. Killer post Andrew.

    I'm sure the Canadian banks are loving this series 🙂

  11. Gaby says:

    Hi Andrew,

    First off, I absolutely LOVE your book. I’ve got all my family and friends reading it!

    I’m 28 and currently don’t own any investments. I do have some money saved up and I’m not sure what I should do with it (actually some is in a TFSA that’s the closest I’ve got to any investments and the rest is just in basic saving accounts)?

    I’m in the process of opening up an e-series account with TD but am not sure if I should have it tied to an RSP or TFSA? Right now I just opened up a non-registered e-series account and was wondering if I will be taxed on any income made (don’t really understand the whole tax part of investments and RSP’s)? Should I have had the e-series account tied to a registered account? I just read a link that was in one of your posts about registered and non-registered accounts.

    Also, my husband received a pension payout that we have placed in a RSP Premium Rate Savings Account (locked-in) we are going to have this money transferred to TD and open up a locked-in RSP e-series account, so should we just contribute to this one RSP account or should I open up my own RSP account?

    Basically what we would like is to of course, have money saved for our retirement as well as some for our children’s education (one is 8 and the other 3)? We don’t bring in a lot of money together but have cut a lot of things out to save a good amount and we want to build on it but aren’t sure how. We are confused and I’ll admit, a bit scared as we never owned any type of stock or bond before and are worried about losing money that we struggled so hard to save. Can you offer any advice for us?

    Thanks and sorry for the long note but after reading your book it’s been hard trusting any advice given from the advisers at the banks 🙂


    • Hi Gaby,

      I'm really glad that you liked my book and I'm so thrilled that you were able to read it as such a young age. You and your husband are going to do really really well. You're already miles ahead of most people, from a financially educated perspective, and I'm really happy about that.

      The first thing to do is fill up your tax sheltered contribution room. You and your husband should maximize your TFSA accounts. If you want, you could fill these with your Canadian bond e-Series funds. If your husband has the higher salary, fill up his RSP next with a combination of e-Series funds, like the couch potato model I mention in my book.. You should be able to call Revenue Canada and ask how much you can contribute to his RSP this year. If your income is higher, than set your RSP as the one you fill up first.

      Once your tax sheltered accounts are maximized, then you could put some money in your non RSP e-Series account OR throw any extra morgage on your mortgage, if you have one. I might be inclined to attack the mortgage after filling up the tax sheltered accounts. Then once the mortgage is paid off, you can invest in your non tax deferred account.

      Again, I'm really happy that you are getting such a fine start on this stuff. You have a long time to build your assets, but I can tell that you're going to do really well. If you have a couple of minutes, I'd be thrilled if you could write an Amazon review (even a really short one) for my book. Here's the link if you have time.

      Thanks Gaby, and if you have other questions, give me a shout.


      • Gaby, I meant to write, above, in the second to last paragraph:

        "Once your tax sheltered accounts are maximized, then you could put some money in your non RSP e-Series account OR throw any extra MONEY on your mortgage"

        • Gaby says:

          Hi Andrew,

          Thanks for the advice and quick response, very much appreciated!!!

          If you can please clarify what you meant by “you could fill these with your Canadian bond e-series funds”. Do you mean open up an e-series account (tied to a TFSA) made up of only bond Indexes? I’m just a bit confused on how the e-series account works with a TFSA account, would it be the same process as an RSP, open and purchase e-series funds or would you open up an e-series account and any money made would be transferred to a TFSA?

          Also, I tried posting a review on Amazon but it’s not allowing me since I have never purchased anything from them (sorry Andrew). If you know of any other sites I can post a review just let me know!

          Thanks again

          • Hi Gaby,

            To keep things simple, you would own a series of accounts:

            A TFSA account each for you and your husband

            A RSP account each for you and your husband

            Possibly a RESP account for your children's education

            Forget what I said about stuffing just bonds in the TFSA. For simplicity, build a global couch potato portfolio (using TD e-Series funds) for each of these accounts.

            You will only be able to add a certain amount each year, into each account. There are rules about how much you can contribute, and Revenue Canada can give you your RSP limits for 2012 if you don't know them.

            These are all tax deferred accounts; they're very efficient.

            Once you have topped them up, then pay down your mortgage with extra money and/or invest in your non registered account, stuffing that account with the e-Series indexes (couch potato style) as well.

            Hope that helps.


          • Gaby says:

            I am very thankful for all your advice Andrew and will definitely be following your strategy!


          • Gaby says:

            Hi Andrew,

            One more quick question…did some research on the different accounts and short term/long term investments and was thinking of setting up one of the TFSA (either myself or my husbands) for short term goals (10 years or so) such as child education and maybe for home maintaining, if needed. So in this case do you think it is better to just stick to bonds in the TFSA, like you mentioned before, or allocate a small amount into stock indexes?


          • If you want the money in 10 years Gaby, I think you should keep about 70% to 80% of it in bonds.

  12. Jeff says:

    I have left a review Andrew, it's the least I can do.

    thanks again


  13. Gaby says:

    Hi Andrew,

    First off, I absolutely LOVE your book. I’ve got all my family and friends reading it! Never knew much about the stock/bond world and your book has set it out simply, thanks for an amazing read!

    I’m 28 and currently don’t own any investments. I do have some money saved up and I’m not sure what I should do with it?

    I’m in the process of opening up an e-series account with TD but am not sure if I should have it tied to an RSP or TFSA? Right now I just opened up a non-registered e-series account and was wondering if I will be taxed on any income made (don’t really understand the whole tax part of investments including RSP’s and TFSA)? Should I have had the e-series account tied to a registered account?

    Me and my husband want to be able to build on what we saved but aren’t sure how? Should we each open a separate RSP account or just open one and contribute to that together? Also, would it be beneficial to open up an RESP or a TFSA account for each of our children? The oldest is 8 and the other 3, not sure if an RESP is too late for the 8 year old???

    Thanks and sorry for the long post but after reading your book it’s been hard trusting any advice given from the advisers at the banks 🙂


  14. Diane says:


    Can't wait to read the end of the story… or is it the beginning… ? 🙂 I am from Montréal ! Read everything I can put my hands on about the best way to invest my money!

    • Hi Dianne,

      Thanks for the comment. The last post in the series is the silver lining–how to open a low cost investment account with TD's e-Series funds.

      I think it's great that you are keen to learn everything you can about investing. Put loads of wait on academic papers/books rather than market based news in magazines, The Wall Street Journal etc. Academics, like David Swensen, Burton Malkiel and the like want to educate. Much of the rest of the world wants to entertain, and to make money off those who want to be entertained. And most of what is written about money is meant to entertain, cause you to feel fearful, anxious or greedy….so that you do something. This fuels the industry.

  15. scott says:

    I think this kind of post might be why Hallam is bald.

  16. Jeff says:

    Hi Andrew,

    I trust all is well with you and your family. I know you have had health issues. I have to tip my hat to you for being able to deal with that and help all of us get back on the financial track.

    One more quick question. My daughter just had a baby boy (Max) I want to open an RESP for him. I want to use my CIBC Investor Line account and buy the same funds that I am buying for my RRSP (same as Keith). Based on my CIBC holdings CIBC charges me $6.95 per trade. I want to invest a lump sum of $500.00 per year into Max's account. My question is, would you split the money between the 4 funds each year or just alternate the entire $500.00 between the funds?

    I look forward to your reply.

    Many thanks


  17. Debra Christian says:

    I would not encourage anyone to go into segregated funds! I had half of my portfolio through Manulife for a ten year period and did not make one red cent! The management fees were very high and although my investment was "protected" in case of death, and, I was assured that I would not loose my original investment, it was heartbreaking to have my future retirement investment perform so poorly. I certainly wish I had your guidance when I first started to plan for my financial future. I'm heading off right now to buy your book for my 25 year old daughter. Maybe she will be more successful in investing than I was.

    • Thanks Debra! You've reminded me of what I need to do with my personal finance class next week. I should introduce the variable annuity. I won't tell them they're bad, but let them figure it out by asking them very specific questions about the products. I'm sorry to hear that you had such a bad experience, but I'm thrilled to hear that your daughter will be starting off on the right track.

  18. Kim Duke says:

    Andrew and Mike…and Mark too!

    Well boys, I DID IT!!!

    Spent 2 hrs with TD, opened up the Discount Brokerage Account, transferred my LIRA without any fees, I'm purchasing the e -series funds, FINALLY opened a TFSA and kept asking the questions until I received the answers that the three of you advised me on. I actually knew more than the adviser I met with as well as the first 3 people she spoke to at TD Waterhouse. I kid you not.

    Thanks to all 3 of you great guys who took some time to answer a post. If I had children I'd name them after you.


    • This is great to hear Kim! Well done!

      Now you're ready to spread the word amongst your friends. When you can show them how to make twice as much money as they ordinarily would (in future investment gains) it's a pretty cool feeling!

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