These investor advocates fight a lonely battle
Many industry groups seem to have vested interests


Jonathan Chevreau
Financial Post

Dec. 23, 1999

Who's keeping an eye out for the small investor? At first glance, the little guy or gal is seemingly blessed as a "consumer/investor" -- the term used in Glorianne Stromberg's second report on investment funds last January.

Canada has 13 provincial and territorial securities commissions and numerous mammoth industry associations representing the banks, brokerages, mutual fund companies, investment counsellors, insurance agents and financial planners.

But many of these entities often have a vested interest in protecting the status quo and the livelihood of the professionals they represent.

Why is it that the people who seem to care most for the small investor's interests are a small coterie of people ranging from mainstream communicator-educators to sometimes bizarre lone-wolf consumer advocates?

We've encountered some of these individuals in this space before: Jim Roache, Stan Buell, Joe Killoran and Steven Handler.

Most of these self-styled consumer advocates utilize the general press and the Internet.

Some have their own Web sites or post regularly on public discussion forums such as The Fund Library (www.fundlibrary.com) or the new Wealthy Boomer discussion forum (www.wealthyboomer.com), which I moderate.

Jim Roache's site (http://members.home.net/jfroache/nesbitt.html) catalogues grievances of the members of a group he represents against full service brokerage firm Nesbitt Burns.

He is a risk-averse conservative investor who feels his account was "churned" and subjected to trading activity inappropriate to his stated risk tolerance.

Mr. Roache is suing to recover $250,000, including losses from about 10 speculative stocks, among them the ill-fated Bre-X Minerals Ltd.

"The system needs fixing and there are many honourable people at the OSC, IDA and in the legal community [such as Ms. Stromberg] doing their best against great odds," says Mr. Roache.

"After comparing notes with literally hundreds of aggrieved small investors, it saddens me to report that there is no real help to be had at either the industry [compliance], regulatory or legal levels for most," he continues.

"Things are not as portrayed in the industry ads. This fact brings into question the whole concept of the SRO [self-regulated organization] in all sectors, but especially financial services."

An earlier dispute is that of Stan Buell with CIBC Wood Gundy Inc. About 18 months ago, he started an organization called the Small Investor Protection Association, which has 150 members. Based in Unionville, Ont., the Web site is at http://209.167.164.25/home.html.

The above two individuals fell into advocacy after being mistreated (in their view) by full-service stock brokerages. One can only imagine how many others will take up the cause if history's greatest bull market turns into a bear market early in the new century.

In the mutual fund arena, Joe Killoran (www.investorism.com) is the most vocal consumer activist.

Mr. Killoran, who used to publish The Frugal Bugle newsletter, is a former stockbroker trained in what he calls "financial mechanics."

He now says he's ashamed of the sales techniques the brokerage industry imparted to him.

Mr. Killoran has been such a thorn in the side of the mutual fund industry that he's been essentially blacklisted from employment in the industry, and currently he is supply teaching to fund what he terms his "lonely crusade."

Apart from an often-ignored media e-mail list, his chief weapon is a one-page "point-of-sale" disclosure checklist, which can be found at his Web site.

Last of the group is consumer advocate Steven Handler of the Canadian Alliance of Individual Investors (CAII).

While the "alliance" part of the title suggests an umbrella organization spanning all such groups, it isn't. The CAII name was derivative of, but not connected to, a similarly named AAII, the American Association for Individual Investors.

The CAII ceased publishing its newsletter eight months ago. Mr. Handler recently launched an uncensored forum for discussing investing but it is in desperate need of editing. The language is often offensive and inflammatory, which is why I am not disclosing the URL here.

Mr. Handler weighs in against buy-side bias in the media, vested interests in industry-funded organizations, third-party supposedly independent "shills" and a myriad of what he terms "criminal organizations."

Like the boy who cried wolf, he is bound to be occasionally on the mark in his accusations, but who will be listening when he is?

One place to check up on the ethics of Canadian corporations is www.ethicscan.on.ca/.

Toronto-based EthicScan Canada Ltd. monitors the social and environmental performance of 1,500 companies.

If I have missed any other individuals or organizations working on behalf of investors, please contact me for a follow-up column.