[Cover Image of The Naked Investor

I picked up this book on the recommendation of a reader and I am glad I did. The author, John Lawrence Reynolds, delivers a scathing criticism of the investment industry in Canada for being more interested in lining its pockets than its fiduciary responsibility towards the average investor. The subtitle of the book Why Almost Everybody But You Gets Rich on Your RRSP is an excellent summary of the author’s thesis.

Mr. Reynolds begins each chapter of the book with a real-life, often tragic tale of average investors exploited by mutual fund salespeople, brokers, banks, media gurus, financial advisors or scam artists and then finding the industry fighting compensation attempts every step of the way. Meanwhile, regulatory agencies in Canada, unlike those south of the border, do not carry a big stick and even the criminal justice system is far too tolerant of white-collar crime. The author’s outrage at the industry tactics drips from every page of the book.

The author also spells out how average investors can invest for themselves using the Couch Potato Portfolio and suggestions for avoiding fraud. If you invest in mutual funds or have a financial advisor or stockbroker you owe it to yourself to read this book. As the author says, “You Are David, They Are Goliath and You Don’t Have a Slingshot”.

This article has 13 comments

  1. I read this book about a year ago, and it pretty much confirmed my suspicions about the industry.

    It pushed me to get serious about a self-directed RSP account for myself and family.

    It’s been a steep learning curve, but I figure i’m getting paid to learn as I go. As opposed to paying for the privilege of lining someone else’s pockets.

    Excellent read, well worth your time.

  2. Sounds like my kind of book.

    If only I could convince my sister to read it — a proud owner of 2.5% MER mutual funds that somehow found a way to lose 7% in the bull market that was this past year.

  3. if any of you have advice for a reader who has been victim of a stock broker fraud, can you please leave your comments here:
    http://canadianmoneyblogs.blogspot.com/2006/12/financial-advisor-fraud-reader-needs.html

    I would really like to help this guy, but I am out of my league here …

  4. As an previous stock broker I can confirm that my firm definitely focused on the churn rate of client accounts. Most of my clients would have been much better off had they just paid me a fee and bought ETF’s

  5. Many thanks for the kind supporting words. Interestingly enough, some of the strongest support for the book’s premise has come from past and current advisors/brokers who recognize the problem and want to ineffective (that’s a euphemism) people out of the business. Please note that a new Revised Edition is out with updated material.

    Much appreciated.

    John Lawrence Reynolds

  6. Sorry, I dropped the word “eliminate” from just before “ineffective.”

    JLR

  7. This reminds me of the look on the face of my bank rep when I cashed out my RRSP to do Smith. Glummer and glummer she became as I explained calmly and with detail why shoving my max into my RRSP year after year was not going to accomplish nearly as much (for me) as getting rid of my mortgage and investing outside of an RRSP. “Well maybe there will be something we can do for you someday” is all she managed as parting words. Nothing ever felt so right LOL.

    The annual RRSP ritual is of greatest benefit to the finance industry, that’s why they spend a small fortune make people feel like not using and maxing an RRSP is the sure path to living under a bridge in retirement. Doing the opposite (even theoretically) of what the banking industry wants you to do would be an interesting experiment…

  8. Great book! I’m now going to corner my advisor and ask him about my MER’s, DSC’s, trailer fees, etc. And I’m starting my RRSP meltdown immediately.

    John, is this book available on CD?

  9. Canadian Capitalist

    Do ask your advisor about his compensation and question what he/she is providing for you in return, but don’t take a hasty decision to meltdown your RRSP.

  10. I read this book and it disturbed me.
    After that, I decided that I would start doing it myself, eventually …

  11. Pingback: Readers love these books — Canadian Capitalist

  12. I read this book a while ago and it was great.

    It will be really eye opening for anyone who has money invested with an investment adivsor. I think investment advisors are helpful, although I wish more of them were simply fee based. – That way you can pay for the advice instead of getting free advice with a hidden fee. Trust me free advice is rarely “free.”

    The current system really does not put the advisors interests and the clients on the same page.

    I think there is a shift happening. As Canadians become more educated about how the system works and with the help of sites like this it is going to be more difficult for financial institutions to take advantage of consumers.

    Just my two bits.

  13. just ordered this book 🙂