Tips from Ellen Roseman on how consumers can fight back

Ashley Redmond: I'm Ashley Redmond for Morningstar.ca and I am here with Ellen Roseman a Toronto Star columnist and a well-known consumer advocate.

Ellen, thanks so much for joining me.

Ellen Roseman: Hi, Ashley.

Redmond: You have recently written this book Fight Back. It contains 81 ways to help save money and also to protect the consumer from corporations that are trying to squeeze them. So Ellen, how did you decide what to include in the book?

Roseman: I tend to get a lot of emails from consumers about sometimes what went right in a transaction but more often what went wrong. So I am looking at what went wrong and trying to help people with the common mistakes that they make or the common error areas where they feel corporations have way more knowledge than they do and are leading them in directions that they don’t really want to go.

Redmond: Within the book you have a lot of entries from guest contributors, so how did you decide what to include for those?

Roseman: I have a number of ombudsman in there because they are like me. They deal with a lot of complaints and they are always trying to figure out, based on the mistakes that we make as consumers, how to educate people and what areas to try and make them more aware of.

There is one called the Office of the Taxpayers Ombudsman, and they deal with Revenue Canada complaints. A lot of people found that really unusual because they didn’t know that they existed. They have small budgets. So I am trying to publicize them. And then others who are activists or achieving change on behalf of consumers.

Redmond: And part two of the book is about finances. And since we are at Morningstar we should chat about that. What should viewers expect from that section of the book?

Roseman: Well we are looking at investing, which is obviously a big black hole for many people. They just don’t know what's involved and sometimes they take a lot on faith because they don’t want to get too into it, because they are afraid that it's too hard for them. So trying to help them with picking a financial advisor and knowing what's good and bad about financial advisors.

Looking a bit about dealing with the Canada Revenue Agency and making sure that they are not overly assessing you or getting you into trouble. As well a little bit about investments and what to pick and what are good investments and so on.

Redmond: And when you look back on your years as a columnist, what are some of the mistakes that you see people making again and again with finances? And similarly with investments?

Roseman: Well with consumer purchases, people often say, well what do you think of buying this? And then you realize that, often they bought it and they are just asking you after the fact. So I really advocate that people do their research and it's so much easier now online. I always tell people look at whatever it is you are planning to buy and then add the word complaints because that brings up the stuff that you need to know.

And go to places like HomeStars, if you are hiring a contractor and see what kind of reviews they have and go to Yelp; there are so many review sites. Now you got to be careful because some reviewers might just be out for revenge. When travelling TripAdvisor is a great one.

There are great online resources [available]. So, do a little bit of work in advance because afterwards it's really hard to get out of these purchases. If you are lucky, and you paid with a credit card, and you have complained in time then the credit card issuer can reverse it.

But for many people they sign contracts without really reading them. I think in general people tend to be somewhat trusting of what they are told.

And gym contracts for example. They will go in and they will be told, well you can change your mind anytime and they will sign and they won't read the fine print, which says 10-day cooling off period and after that, you are stuck for a year. And they will say, but they intentionally lied to me. And you kind of have to break the news that, well sales people will say anything to get that signature on a contract, so don’t be someone who says, well I didn’t bother reading it because I trusted them. You got to read it.

Redmond: Okay. And what are some of the mistakes that people make with investments?

Roseman: I think it's that they tend to be somewhat conservative. They will put all their money into GICs and sometimes they will mistake an RSP with an investment. RSP or a tax free savings account is just like a big fortified house in which you hold your investments and it keeps the taxman away for a while. And when they get into something more adventurous like mutual funds they often have no idea what it is they are investing in, what their asset allocation is – some of the stuff is technical.

But if they don’t read their statements, if they let the envelopes pile up and they don’t even know who they are dealing with, like is this advisor someone who is a friend of a friend? And they deal with him just because that's easy. I had someone in my office that had an issue. She had dealt with a friend of a friend and for nine years she had a $50,000 line of credit and had not paid anything but interest.

And half of the money was going into a mutual fund that was dividends and then the distributions were being used to buy other mutual fund units. And after nine years, first of all, because it was monthly distributions the DSC, the deferred sales charges, were still being charged. She hadn't gone to the end of the schedule because each purchase was a new DSC schedule.

And her investment hadn't done very well and she wanted to get out and I don’t think she even realized what was going on. And the only reason she came to me and asked for help and finally got out of it, was because the advisor was retiring, because she was part time and also she was having trouble sleeping, because it just bothered her that she had such a big loan that wasn't being paid off.

Redmond: And investors now are pretty lucky. We have a lot of tools online. We have online brokerages, things that weren't available even 10 years ago.

Roseman: Yes.

Redmond: So do you advocate using online brokerages for investors or do you still prefer financial advisors?

Roseman: I have both and I like using both. I teach investing for beginners, a course at U of T and I have done this for nine years. And I know that some people want to do their own investing and if they have the interest and if they learn in the class they are going to do well.

But some [people] come to the class and their head is swimming and they just can't really seem to fasten onto enough information. So they are really just looking for ways to talk to their financial advisor and they are always going to use a financial advisor.

I think do-it-yourself investing isn't that hard because we now have the couch potato portfolio and we have got ETFs that are very – if you have like four ETFs representing different markets, you will be fine with just an annual rebalancing. But even for those people, to open up a brokerage account on their own and make their own choices can be intimidating.

So I don’t push anybody into DIY investing. I think that if you have the interest and the ability to learn, great, but if not stay with your advisor.

Redmond: Yes. Interest seems to be, key.

Roseman: Yes.

Redmond: So when you reflect back over the years as a columnist, what are some of the positive trends that you have seen in the industry, anything that you are particularly proud regarding consumers because things seem to be changing or going in the right direction?

Roseman: Well on the consumer activism front we have seen a lot of good groups bringing better legislation. In Ontario, for example, we have gift card expiry laws and negative option billing prohibitions. We have the Financial Consumer Agency of Canada on the federal level, which does a lot of great work. We have got Investor Education Fund. And in other provinces too, we have seen quite a lot of consumer activism leading to much better government policies.

On the corporate front, I think that companies are very much aware of customer service and they are certainly aware of the online social media world, where a renegade consumer can cause all kinds of terrible publicity, especially if they go viral. But for many companies it's still a cost that they want to manage and so they are outsourcing and sending it off to lower cost countries.

Even though customers don’t find this all that satisfactory and they have a lot of trouble escalating and getting to the head office, they still – they don’t see that as an investment. They see it as something that they have to cut. And I’d like to see much more awareness by companies that unless they really try and make customers feel special those customers won't be with them for very long. And that's what I talk about a lot in the book.

If you are a loyal customer, make sure that the company recognizes that loyalty and gives you the same deals that they give the brand new customers that they are always trying to attract, because we tend to discount our loyalty but that's an important factor and companies should recognize that. And when you tell them they do.

Redmond: Great. Thanks so much, Ellen.

Roseman: Thank you.

Redmond: To find out more, check out Ellen's book, Fight Back, in stores now.