Deception at the door

My column today was about salespeople going door to door and misrepresenting their product in order to get a signature on a long-term energy contract. This drew more response than anything I’ve written in a long while. I know it hit home because many readers told me they had exactly the same experience. Here are some of their stories below.

I have many questions that spring to mind:

–How can the Ontario Energy Board say, “the energy choice is yours,” when many people are not making informed choices? They don’t know where energy prices are going, so they rely on promises made at the door. And the contracts they sign are impossible to understand.

–Why do energy marketers employ salespeople who use such sleazy tactics?

–Why won’t the Ontario Energy Board levy fines against energy marketers that employ sleazy salespeople? It has the power to do so — and has done so in the past.

–How can these companies justify charging so much more than the utility rate in return for an illusion of saving money?

–How can the Ontario government allow marketers to sign up low-income people at prices that are up to double the utility rate? I’m sure this is causing great hardship for households living on tight budgets.

My final question: Should this opportunistic business be shut down? Whose interests are being served?

I know that consumers benefit if energy prices rise higher than the contract price. But this is a gamble, best undertaken by those who know what they’re doing. Maybe these contracts should be legal only if the consumer approaches the company, not vice versa.

Lessons you didn’t learn when you were young

Do you wish someone had told you how to manage your money before you made costly mistakes? Could the right advice have saved you from a lifetime of trial and error?

I want to hear the financial wisdom you’ve picked up along the way that you think would help young people. This is in preparation for a course I’ll be teaching at George Brown College later this month and again in May. The target audience is in the 20-to-35-year age range, struggling to get an education, graduate with as little debt as possible, get a foothold in the job market, settle down with a life partner and pay for big purchases like cars and homes.

This nine-hour course, offered in partnership with the Financial Consumer Agency of Canada and the Investor Education Fund, will be free of charge. Now that’s a great deal.

So, tell me the things your parents or teachers never taught you as you grew into adulthood and started taking control of your money — or letting your money control you.

So, how do you feel about the stock markets?

I knew the stock markets would be volatile, but this was more turbulence than I expected. I didn’t look at my online account all last week and certainly not on Monday. I finally dared to take a peek on Tuesday, when markets recovered a bit, and it wasn’t quite as bad as I thought.

One good thing: I’m much less tempted to buy or sell in a declining market than I am in a rising market. It’s nice to take a breather. The low cost and ease of online trading can turn you into a hyperactive investor. You can buy a leveraged bear fund that will profit from down markets. But that requires constant vigilance. It’s for traders, not investors.

If you have a financial adviser, you should be getting a call or email asking if you need help or reassurance. This a litmus test for a good adviser: Are they available when you need them? I spoke to one investor who sent an email two days ago to her adviser and hasn’t gotten a response, not even an acknowledgement. That’s a sign she should be looking to switch.

My stockbroker, who helps manage my RRSP, called and left a message yesterday. She didn’t have much to say, but wanted me to know I could call and chat if I wanted to. I didn’t take her up on the invitation, but felt good knowing that I could.

Are your investments diversified? Do you have too much in stocks and not enough in bonds and cash? How much time do you spend on asset allocation? Are you getting enough help with this important decision? All these questions are addressed by Preet, a financial industry insider, who says he didn’t blink when the TSX dropped 600 points.

The power of social media

I’m a believer in posting your complaints online, especially when it’s done with a light touch (no name-calling, please). And I’m impressed when I see people set up websites to air their dirty laundry and provoke a response from the company that has done them wrong.

Jeff Jarvis got a rise out of Dell in 2005, when he posted his story on his Buzzmachine blog. He paid his time in Dell Hell and now he thinks the company has come a long way in learning from customers. Heck, he even got Businessweek magazine to pay attention.

Here’s a Canadian example, involving Nick Breau of Fredericton, N.B. His 52-inch TV set, purchased from in 2005, stopped working recently and he couldn’t get it fixed. He sent me an email yesterday morning:

A friend sent me a message that you may have contacts at Best Buy that can help resolve my situation. I have been fighting with Best Buy for the last 4 weeks to get a television serviced under their PSP (personal service plan). So far, all they have offered to do was refund the price I paid for my service plan and not service the set.

Breau knows computer code. So he started a website to express his outrage.

By mid-afternoon yesterday, he had an email from Best Buy, saying he’d get a refund of the $2,300 purchase price. That’s better than the previous offer to give him back the $300 cost of the three-year warranty.

What caused the about-face decision? Maybe his blog — and maybe my sending his email to several Best Buy contacts, asking them to do the right thing. This was one of the swiftest capitulations I have seen.

After reporting his victory at his website, Breau recommended checking the website of a social media expert in the U.S., Jason Falls, who recently gave a talk in Fredericton. I find some of his stuff mystifying to read, but I liked what he said about building brand communities. Something’s happening here.

Your call to TD Bank may be answered in India

Bell and Dell paved the way in using Indian call centres. Now, one of the Big Five banks is trying an experiment.

A reader notified me of this pilot project and I confirmed it with a TD spokeswoman. I’ve posted both emails below.

This raises issues of possible job losses in Canada, the privacy of personal information and the ability of people located in a far-off country to understand and explain sometimes complex Canadian banking rules and arrangements.

In an earlier controversy about outsourcing by Canadian banks, the Toronto Star ran a story in 2004 about CIBC and RBC outsourcing the management of their credit card operations to a U.S. company, Total System Services Inc.

As a result, Canadian cardholder information could fall under U.S. legislation, such as the U.S. Patriot Act, enacted after the Sept. 11, 2001, attacks, greatly expanding the powers of the Federal Bureau of Investigation.

The pros and cons of leveraged investing

Last Sunday, I wrote a column launching Money 911. Why that name? I think there’s an emergency for those who want independent advice, free of conflicts, from their financial advisers.

I talked about a man in his late 60s who got talked into mortgaging half his home’s value to buy investments. After a year, he was losing ground and was looking for help on whether to stick with the leveraging plan. He figured that his financial adviser, who worked for the bank that gave him the line of credit secured to his home, would not offer an impartial second opinion.

Leveraged investing is popular with many commission-paid advisers. I’ve met some who insist it’s right for every client — even those with new homes and young families. They’re zealots about how essential it is to boost your retirement income by borrowing to invest. But they don’t always talk about how lucrative it is for them.

In response to that column, I got two very intelligent and well-reasoned responses from industry insiders. I’ve posted them in the comments section and I’d like to hear responses from others.

Are you ready for a Couch Potato portfolio?

It’s become popular to say investors can profit by creating a simple portfolio of low-cost index funds traded on a stock exchange. It’s less expensive and easier than buying stocks or actively managed mutual funds.

The latest is Larry MacDonald at Canadian Business with his “one-minute portfolio,” a mix of just two ETFs (large-cap Canadian stocks and bonds).

MacDonald’s portfolio is even simpler than the Couch Potato strategy laid out in Money Sense magazine in March 2006, which includes some U.S. or international equity index funds. If you intend to retire in Canada, you can probably get away with keeping all your investments here.

There’s also the Easy Chair portfolio, developed by Rotman business professor Eric Kirzner and tracked by the Toronto Star’s Portfolio Doctor column. Back in 1997, Kirzner predicted that he could earn a return of about 8 per cent over time on an annual compounded basis. And he was right.

His basic and conservative asset allocation is 20 per cent cash, 30 per cent Canadian bonds, 35 per cent Canadian equity and 15 per cent U.S. equity.

“I picked an asset allocation that is classic,” notes Kirzner. “It is a balanced portfolio and quite defensive. Twenty per cent in cash is quite high but if I was anticipating the year 2000 crash I would have gone 100 per cent in cash!”

So, what’s the appeal? Why not be a “gamer” a la Jim Cramer, constantly buying and selling and following hunches and changing your mind? Isn’t the couch potato diet just like it sounds — bland and starchy?

Well, if you’re not a couch potato yet, here are some reasons to warm up to the idea.

–You’re not paying a manager to lag the index
–You’re not trying to outguess the market
–You’re saving time and emotional energy

Scott Burns, a columnist for the Dallas Morning News, came up with the concept in 1991. He says it’s important to be a dull investor.

This means:

no complicated accounts
no diligent reading of the financial press
no phone calls from brokers with opportunities
no meetings with investment advisors demonstrating their constant supervision of accounts.
and very simple tax returns.
It also means more time at the beach, if you are so inclined. Or more time being a couch potato.

With the stock markets so wild and crazy, a couch potato plan — boring though it may be — starts to look very appealing.

Give us your thoughts on how the lazy approach works for you.

Here’s a New Year’s resolution for Canadian companies: Fix customer service

Maybe this will be the year that companies realize they can gain a competitive edge by offering excellent customer service.

In an example of what I hope will be a trend, Lowe’s Canada is using a customer-focused approach in advertising its three giant home improvement stores opened last month in the Toronto area. The TV ads point out how shoppers can summon help quickly with call buttons all over the place.

I did a tour of the Brampton store last week. I was impressed by the bright lighting, ease of navigation, broad selection, informative signs — and, of course, the call buttons. There’s a storewide announcement after you ring. Then, there’s a ding-dong sound when the staff know your request is fulfilled.

The ads make you think, without really saying so, about the inferior service you get at home-grown rivals such as Canadian Tire.

“We take ownership of customers’ needs and accountability for meeting them,” says the statement of core values at Lowe’s website.

“Customers drive our business. We will enhance our understanding of customers and their needs through continuous learning.”

It’s too soon to say whether this company will live up to its lofty rhetoric. But I know of many others that don’t.

Check out the Dell complaint I got today, where a reader has been waiting many weeks to get a refund on a cancelled order. The company’s core values were not observed.

Also, check out the response from Future Shop’s vice-president Mike Chuback about the Boxing Day sales controversy — computers advertised at one price and sold at a higher price. He’s really trying to take accountability in this case.