BMO financial planner's 'erroneous' advice loses Ontario couple almost $50,000
Bank reimburses couple after Go Public investigation, and experts call for higher standards
A retired couple says trusting the advice of a Bank of Montreal financial planner cost them almost $50,000.
Tom and Gloria Ratcliffe went to BMO's Belleville, Ont., branch in the spring of 2014 because they wanted to transfer some savings from an American retirement savings account to a Canadian RRSP.
Financial planners at two other big banks — CIBC and RBC — had recommended against the move, saying the couple would lose a huge chunk in taxes on both sides of the border.
Their last stop was at their local BMO, where they knew the branch manager.
There, financial planner Karen Gill told the Ratcliffes that the transfer could be done, and gave them a printout showing it was possible, if they paid a 20 per cent withholding tax in the U.S.
"I asked her why it wasn't a problem," Gloria Ratcliffe told Go Public. "And she said, 'Because BMO is such a big organization, we can do things other people can't do.'"
But the information Gill gave the Ratcliffes was wrong.
The printout wasn't BMO material, it was something she had found on the internet, and it didn't apply to U.S. citizens like Tom Ratcliffe, who says he told Gill he was American.
The Ratcliffes transferred $198,000 in Canadian funds, and at tax time found themselves hit with hefty Canadian and U.S. tax bills.
On top of that, the money led to part of his Old Age Security pension getting clawed back.
All told, the couple say they were out about $47,000 — almost one-quarter of the savings they transferred.
"We just fell apart," Gloria Ratcliffe says. "We didn't know what to do."
"We hardly sleep at all, at night," adds her husband. "We had worked and saved. And when this is just ripped away from you ... I mean, we're really, really angry at BMO."
The Ratcliffes had to borrow $10,000 from another bank to pay their bills.
Retired at age 68 and 70, both were exploring the need to get part-time jobs to make ends meet.
Bank 'should make it right'
The couple, who had been BMO customers for 30 years, tried to get the bank to admit responsibility, and compensate them for their losses.
"Everybody makes mistakes," says Gloria Ratcliffe. "They should make it right."
In December 2015, BMO sent the couple a letter, saying a review had determined that they "were not provided with the appropriate level of service."
BMO offered the couple almost $19,000, far less than the $47,000 they say they were out.
Go Public steps in
Desperate, the Ratcliffes contacted Go Public, which started making inquiries.
Last week, BMO wrote a cheque to the Ratcliffes for $50,000, admitting in an email that the financial advice they received was "erroneous," and adding, "It simply took too long for us to get these calculations right and for that, we sincerely apologize."
BMO spokesman Ralph Marranca declined an interview to explain the change in compensation.
"We have a long standing policy of not speaking to details around the dealings with our customers," Marranca said.
It's unclear what motivated Gill to give the Ratcliffes the advice she did, and calls asking for comment were not returned.
Neil Gross, the executive director the Canadian Foundation for Advancement of Investment Rights (FAIR), says often the payment structure for financial planners can lead them to make poor suggestions.
Financial planners on commission
He says financial planners are often similar to salespeople — they make a commission from putting people's money into bank-owned products.
Gill was a licensed mutual fund dealer, and put half their savings into BMO-run mutual funds.
"I was under the impression that people who worked in banks did not get commission for what they did," says Tom Ratcliffe. "That gave me a sense that they were looking after me."
Gross would like to see new standards for financial planners that would prevent them from personally benefiting from the advice they give customers.
"We'd like to see those standards set at a level of true professionalism," he says. "To ensure that everything the financial planner does is done in the best interest of the client. And not for the purpose of selling products."
Later this year, new regulations will start to roll out across Canada, requiring financial institutions to give consumers statements showing the amounts their advisers are receiving in commissions.
'Mystery shopper' reveals problems
Last fall, investigators with the Ontario Securities Commission mystery shopped with 88 financial advisers across Ontario, testing the quality of advice consumers were given.
In 75 per cent of the cases, there was no discussion regarding how advisers are compensated.
"What's critical here is that all of that advice be given to people, based on what's in their best interest," Gross says.
The Ratcliffes received their cheque from BMO last week.
But they say they are still recovering from the stress of a year of doing battle with BMO.
"We must say that what should simply be extreme happiness is tarnished by the way we have been treated this past year by BMO," says Gloria Ratcliffe.
"We felt like we were begging them to give us something that was not theirs to take from us in the first place."
CBC News investigates: Stories, videos, photos and more
Submit your story ideas
Go Public is an investigative news segment on CBC-TV, radio and the web.
We tell your stories and hold the powers that be accountable.
We want to hear from people across the country with stories they want to make public.
Submit your story ideas at Go Public.
Follow @CBCGoPublic on Twitter.
ABOUT THE AUTHOR
With files from Enza Uda