Last week I asked, can you trust advice from your bank? The bottom line is you should be wary of any advice you receive from someone who can profit from your actions.

That doesn’t just hold true for banks and financial advisors, but the same goes for real estate agents, mortgage brokers, insurance brokers and car salesmen.

I received an email from Bob Lindsay (name has been changed), who read my review of BMO’s adviceDirect on Moneyville last week.

I’m going to share that email here, because I think many investors can relate to Mr. Lindsay’s experience.

I’m a do-it-yourself investor with BMO InvestorLine. A few months ago, I attended an investment seminar put on by BMO at my bank branch. It was okay – pretty basic stuff for me but I learned a few new things and had some of my ideas reinforced so it was worth the few hours. At the seminar, we were invited to sign-up to receive occasional emails regarding investment news and suggestions. The other day I received their quarterly update for ETF portfolios that set off alarm bells and is the perfect example of your comment about the dangers of trusting a bank that has its own products to sell. It was dedicated entirely to BMO ETFs. It’s hard to believe that with all the other ETFs out there, BMO ETFs are the best in every category. No matter how well some were doing tracking their indexes I’m sure others might do better, or might be cheaper. I wonder what adviceDirect will be telling clients to buy?”

Mr. Lindsay is in the process of simplifying his holdings and switching to mostly index ETFs. Like many do-it-yourself investors, he’d like some advice but can’t accept the fee structure commonly used in the industry.

Related: Mutual Fund Fees – The High Cost Of Canadian Funds

At one time, Mr. Lindsay briefly went with BMO Harris (private wealth management) because he thought even with the very high fees they charge, it would eliminate a lot of time and effort and free him up to enjoy other things.

But after they made mistakes in a proposed portfolio they offered for discussion and were unable to successfully transfer his InvestorLine accounts, he quickly went back to InvestorLine.

“What’s the point of paying huge fees when I still have to watch everything they did?” says Lindsay.

So when BMO’s adviceDirect was announced, he was initially interested in the service. He could still manage his portfolio while getting personal advice on buying and selling.

Related: Do You Need Financial Advice?

“But then I started to have my doubts,” says Lindsay. “I read that their advisors would be relatively junior people. It might be a good way for them to get some experience, but not at my expense.”

But the real killer with adviceDirect is the 1% annual fee. Once the portfolio is set-up, he’d need almost no advice.

He hopes to set up something similar to a Couch Potato portfolio of index ETFs. After the initial trades to sell existing holdings and buy some ETFs, his only trading would be re-balancing once a year – which might involve a half dozen trades, if that.

“With ETFs tracking known and established indexes I’d be reasonably confident they’d behave as they have historically,” says Lindsay. “So for my 1% a year, I’d get very little in return.”

One problem with the percentage fee structure is that it has almost nothing to do with the amount of work involved.

“The percentage fee structure ensures that financial advisors get a predictable, steady stream of cash,” says Lindsay. “Yet, if they charge by the hour and do a good job they might seldom hear from their client.”

Related: Fee Only Financial Planner Vs. Commission Based Advisor

What Mr. Lindsay is really after is advice from an established investment advisor who charges by the hour. Once the portfolio is set up, ideally they’d meet once a year to review things and see if any tweaks were needed.

One of the challenges he faces, along with many retirees, is the lack of discussion about appropriate portfolios for retirees.

Related: Wealth Based Portfolio Vs. Income Based Portfolio

There are lots of model portfolios out there but they mainly talk about asset allocation based upon age and risk tolerance.

For retirees, age is an important factor because they may not have the time to wait for markets to recover or to benefit from future growth. Retirees need income now, not capital gains five or 10 years from now.

Risk tolerance is such a personal thing, and it’s the “tolerance” part that bothers Mr. Lindsay the most.

“It’s less about tolerating the risk in your portfolio than it is about understanding that some volatility is to be expected. Your portfolio should be structured so that volatility is minimized – and to differentiate between volatility and something going down the tubes,” says Lindsay.

Final thoughts

Mr. Lindsay’s email highlights a major problem in the financial services industry today. First time investors get sold expensive equity mutual funds. Retirees get lured into expensive income funds. Neither group is offered advice on creating a financial plan that’s appropriate for their age and stage in life.

Related: Why A Fiduciary Standard For Investment Advisors Is Needed In Canada

Investors are getting a raw deal from our banks and advisors because we pay some of the highest fees in the world, yet have little to show for it when it comes to investment returns and financial advice.