Bad money advice is rampant. It’s so common you could print money on it, and there are those that do. And for Canadians like Evans and his family on the wrong end of the bad advice, it can be devastating and stressful. In fact, 69% of MoneySense readers polled say they have lost money from financial advice. MoneySense conducted a seven-question online poll from October 4 to October 30, 2023, with a total of 891 respondents from across Canada on the topic of bad money advice, covering financial trends, scams, FOMO (fear of missing out), and trusted sources for financial information.
What’s a trend and what’s just bad advice
When asked “What financial trend have you bought into?” the majority of respondents (49%) said these trends didn’t apply to them. But the top three trends included: Heavier allocation in guaranteed investment certificates (GICs) at 16%, tech stocks at 13% and rental properties at 13%. Here’s the breakdown of responses. (Respondents could choose more than one option.)
Financial trend | Percentage and number of respondents |
---|---|
Heavier allocation in GICs | 15.82% (141) |
Tech stocks (FAANG, MAMAA, MATANA, MANAMANA and Magnificent 7) | 13.24% (118) |
Rental properties | 13.13% (117) |
Crypto/NFT | 10.55% (94) |
Side hustles | 7.86% (70) |
Climate investments | 5.50% (49) |
BNPL (buy now, pay later plans) | 4.94% (44) |
AI | 3.70% (33) |
Meme stock | 2.81% (25) |
Moving out of a city during COVID and later moving back | 0.56% (5) |
None of the above | 48.93% (436) |
“GICs are competitive right now,” says Jason Heath, advice-only financial planner at Objective Financial Partners. (He is also a MoneySense consulting editor.) “They can be a good option for a conservative investor or someone with a short time horizon for their money.”
But for crypto, Heath says: “Cryptocurrency is a complicated asset class. The crypto investors I worry about are those with large allocations. They may get lucky. But it’s a volatile investment that may not be suited for young people building their wealth or for retirees drawing it down. I feel like there’s more of a case for people somewhere in the middle who are building a diversified portfolio, with a small allocation, if any.”
For example, MoneySense’s Retired Money columnist and investing editor-at-large, Jonathan Chevreau (who is also CFO of his own site, FindependenceHub.com), has only 1% (2%, if he’s “lucky”) of his portfolio allocated to Bitcoin exchange-traded funds (ETFs). “GICs and crypto are at opposite ends of the risk/reward spectrum,” he says, with GICs being more conservative with locked-in returns. He points to the 5% return on some GICs in Canada right now as a reason these investments are trending. “I’d call GIC laddering appropriate planning. No one really knows when interest rates will top out so just as dollar-cost averaging takes the emotion out of investing in stocks and equity ETFs, so too does GIC laddering take the emotion out of investing in GICs.”
Are pyramid schemes still around?
According to the survey, almost 1 in 10 (8%) have burned money in pyramid schemes. Illegal in Canada, pyramid schemes are described by the Competition Bureau of Canada as “promising big financial returns for little cost.” Too often, people who fall victim to these schemes pay large fees and are told to recruit family and friends. They are promised they’ll get their money back and then some when they get more members.
“I don’t think pyramid schemes will ever go away,” says freelance writer and former professional investor Stephanie Griffiths, CFA, MFA. “The Internet, especially social media, has given them new life.” Nowadays, though, envelope stuffing has gone the way of fraudulent investments on apps and social media. And it’s even evolved so that accounts are hacked to persuade friends and family to give money.
Text messages to emails to a knock on the door: What scams look like today
Phishing has become so sophisticated, I can think of a week when I haven’t gotten a suspicious message from a friend saying they made a lot of money through an amazing crypto, forex, whatever advisor. These scams are easy peasy to spot, as that’s not the typical behaviour of folk I know or befriend. But when I get a text saying that I have to deposit a bill from a utilities company I use or that someone logged into one of my bank accounts, that does make me pause. And many Canadians are finding themselves in similar situations.