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Money 101 for Millennials
by FCNB on 

Money 101 for Millennials

How you handle money over the next few years is key in reaching your future financial goals. One of your goals may be financial freedom – having enough money down the road to travel, pursue your passion and enjoy life.

Given the challenges millennials face, this may seem like a daunting goal.

Millennials face one of the most uncertain economic futures of any generation since the Great Depression. Many came of age or entered the workforce during the Great Recession of 2008 and, as a result, started their careers at lower salaries or not in their preferred field of work. Additionally, Millennials carry more debt in the form of student loans than any prior generation.

A 2018 report found that four out of five Millennials with student debt said paying off that debt was “extremely” or “very” important to them, and one out of five identified debt as a top financial concern overall.

So it’s easy to see why you may be scrounging to find extra dollars to invest toward your future or feeling reserved about putting your hard-earned savings into an investment that carries any degree of risk. In fact, the same report found only one in two millennials are investing.

The good news is that you have time on your side – thanks in part to compound interest. When it comes to investing, the earlier you start the better.

Here are some habit-forming tips that you can start now to help you reach your financial goals.

Habit #1: Create a budget

Budgets get a bad rap. Many believe they deprive you of the things you want in life. Budgets, however, are tools to help you get the things you want. It is simply figuring out how much money you need to cover your expenses and making sure you don’t spend more than that amount. Here are some steps to get you started:

  1. Total how much you need monthly for the absolute essentials, like your rent or mortgage payment, gas, utilities, groceries, child care and your debts, like your student loan payment (see more on student loans below).
  2. Budget in your contributions to your emergency savings account (see below).
  3. Calculate your discretionary expenses – the non-essentials, like entertainment, eating out and any gifts you may need to buy. On tight months, you can save money here.
  4. Once you have the total you need to cover your expenses, deposit that amount into a separate account at the beginning of each month and use it to pay all your bills. By the end of the month, you should be near zero. Deposit the rest of your pay into a savings account. This is called the budget-to-zero method.

You can download FCNB’s Build a Budget That Works workbook as well as our Monthly Budget Excel document to help you get started.
Remember to review your budget periodically. Your budget should be flexible enough to accommodate things like summer vacation and holiday seasons, when your spending habits will likely change.

Habit #2: Build an emergency fund

Setting up an emergency fund helps you handle a financial surprise without going into debt, or resorting to high-cost loans. Set aside small amounts, like $15 or $20 a week. Aim to have three to six months’ worth of your living expenses in a separate savings account that can be accessed quickly. The key is to only touch it for a financial dilemma, like an unexpected car repair or a job layoff. This is an important habit to build as these surprises usually don’t give you time to adjust your budget.

Habit #3: Automate your savings

Saving isn’t always easy. Making automatic payments can ease the stress. Consider having a portion of your pay directed to a separate savings account. By having the money automatically transferred, you won’t miss it (or accidentally spend it).

Habit #4: Take a hard look at your student loans

Review their terms, conditions and the various repayment options. These will vary depending on whether they came from a private institution (like a bank) or whether they are a federal/provincial loan.

Figure out the total amount you owe, the type of interest rate (in some cases, you can choose between a floating or a fixed interest rate), your monthly payment amount, and how long it will take to pay off the balance. If you have more than one loan, or a line of credit, you may have multiple monthly due dates.

When creating your plan to pay off your student loan, consider:

  • Building loan payments into your budget to make sure you can always make the minimum payment: You can even set up automatic payments through your financial institution.
  • Increasing the size of your monthly payments: The amount you pay over and above your monthly interest payment will go directly toward the principal, reducing your total loan amount. An easy way is to round up your monthly payment. For example, if your loan payment is $236, round it up to $250.
  • Making lump-sum payments: This is one of the fastest ways to pay off your debt and will mean you will have paid less interest, which means more money for you.

Habit #5: Make compound interest work for you

Compound interest has been called the eighth wonder of the world. It is interest that is paid on the original amount deposited and on any interest that has been earned in previous periods. For example, in Year 1, the financial institution pays $5 interest on a $100 deposit. In Year 2, it pays interest on $105. And so on.

Think you don’t have enough money to start investing? With compound interest and time on your side, even $5 or $10 a week is enough to start. Look at your budget. You might be able to find even more. For example, eating one lunch from home versus takeout a week would give you at least $10 to invest. Many brokerage firms and trading platforms are available to you with no minimum deposit required. These firms often offer investment options with low or no commissions or management fees. Many of these firms also offer investing apps for your smartphone (see below). Remember, before placing your money with any broker-dealer, make sure they are registered by checking with FCNB.

Habit #6: Learn about investing

You don’t have to pick stocks if you don’t feel comfortable researching the financial health and history of individual companies.
Many investment products enable you to invest in broad sectors of the market with little or no fees. These products allow you to diversify and spread your risk out over several different companies and economic sectors, rather than putting all your money in one company’s stock.

If you need help building a portfolio, you can also enlist the assistance of a robo-advisor (See our blog  on robo-advisors) or consult a financial professional after checking to ensure they’re appropriately registered. You can check their registration by visiting FCNB or use the National Registration Search.

You can also go retro and check out your local library or visit our website for educational materials on investing.

Bottom Line:

At times, you will be unable to meet your budget. Budgeting is a life-long pursuit. Each month is a new opportunity to recommit to these habits. And, when you are doing well, it’s important to reward yourself.

We can’t stress this enough – right now time is on your side, and with each day that passes, it’s a little less on your side. By cultivating these six personal finance habits, you will be well on your way to reaching your financial goals and paying off your student debt. Remember: Don’t let perfection be the enemy of good.

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Guide : Five Things You Should Know About Financial Abuse
by FCNB on 

Guide : Five Things You Should Know About Financial Abuse

Although anyone can become a victim of financial abuse, older adults may more frequently be targeted as some become more dependent on others and because they generally have a higher net worth. Common forms of financial abuse include:

  • Forcing someone to sign over power of attorney or control of their assets.
  • Forcing someone to sell their house or change their written will.
  • Depleting savings without the account holder’s knowledge.
  • Spending savings for items that do not benefit the account owner.
  • Withholding someone’s funds, pension cheque or other income.

Financial abuse is especially harmful to older New Brunswickers as they are more likely to be relying on savings or fixed income to cover their daily expenses.

Here are five things you should know about senior financial abuse.

#1 – The impact of financial abuse goes beyond the pocketbook.

Being a victim of financial abuse can lead to social isolation, depression, anxiety and other negative health effects. This is because victims often feel ashamed and embarrassed, leading to depression and anxiety. Many victims lose the money they would have spent on social events. This can be isolating. Financial exploitation can even impact a victim’s ability to pay for medication.

#2 – Most financial abuse happens close to home.

Seniors usually experience financial abuse at the hands of the people they should be able to trust. They can include spouses, children, other relatives, friends, neighbours or caregivers. Abusers will use their connection and trust to take advantage of their victim. They also rely on the fact that their victims are unlikely to report them. Fear of shame, embarrassment, reprisals, and loss of support – these are just some reasons seniors don’t report.

#3 – Financial abuse can happen to anyone. 

A common myth you might hear: “I’m not at risk because I don’t have money.”

If you’ve thought this to yourself, think again. Financial abuse doesn’t always involve large sums of money at once. They generally involve small amounts of money. Perpetrators hope that, by taking smaller sums, their illicit actions will go unnoticed.

You might also think: “I’m still mentally competent, and I still manage my own money. I’m not at risk.”

This is also a myth. Seniors who don’t suffer from cognitive impairment, and who are able to manage their finances, are still at risk of becoming victims of financial abuse. They’re just as likely as everyone else of falling prey to someone who abuses their relationship for financial gain.

#4 – You can look for the potential physical signs of financial abuse anytime.

Some physical indicators can be a result of financial exploitation. Here are some red flags you can look for to spot potential financial abuse:

  • Unusual fear of, or sudden change in feelings about, a particular person or people.
  • Change in appearance; poor hygiene.
  • Accompanied by caregiver who is overly protective or dominating.
  • Change in ability to perform activities of daily living including self-care, daily finances, or medication management.
  • Discrepancy between standard of living and financial assets.

More information is available in our Recognizing Financial Abuse tool.

You can also learn about the early signs of financial decline online.

#5 – If you suspect a senior is being financially abused, you can do something about it.

If you suspect financial abuse, you should report your concerns to the local police or RCMP.

More information is available in our Recognizing Financial Abuse tool.

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Breaking the silence on senior financial abuse
by FCNB on 

Breaking the silence on senior financial abuse

A daughter called distraught.

Her mother, who had suffered from Alzheimer’s Disease, recently passed away. Adding to her grief was the discovery she had made while cleaning out her mother’s room in the family home
Her mother’s jewelry box contained tiny notes her father had written and attached to each piece of jewelry to remind his wife of their sentimental value.

“This is your engagement ring.”

“This is your wedding ring.”

“I gave you this necklace on the birth of our first child.”

“I gave you this ring on our 25th wedding anniversary.”

The box contained about a dozen of these tiny notes. But not one piece of jewelry was found in the box. It had all been stolen.

It’s not a far stretch to think a person who could steal these precious possessions may also withhold an elderly woman’s pension cheque or use her credit card for their own purpose. Or maybe fill up their vehicle’s gas tank using a senior’s debit card, or pocket that $10 laying on his nightstand.

Senior financial abuse is the misuse of an older person’s money or property by coercion or other means, often by adult children, relatives, family friends, caregivers or a person in a position of trust.
 It can also include:

  • Misusing a power of attorney document to take money out of the owner’s account without their knowledge to pay for an item that in no way benefits the owner.
  • Cashing in investments without permission.
  • Pressuring a person to sign documents that they don't have the capacity to understand.
  • Coercing, forcing or deceiving a person into lending money or selling their home.
  • Coercing or tricking a person to sell their assets for much less than they are worth.
  • Tricking a person to purchasing unsuitable financial and consumer products.
  • Pressuring a person into providing food, shelter, housekeeping or childcare without payment.
  • Forcing someone to change the beneficiary in a will.

It’s happening more than we want to think, and more than we know.
As part of our enforcement work, we routinely hear devastating accounts of seniors who’ve been financially exploited. These stories are far too common, and we anticipate they could multiply with the province’s aging population.

Seniors now make up 19.9 per cent of New Brunswick’s population – the highest percentage in the country. By 2038, it’s expected to grow to 31 per cent.

So we are living longer, but here’s the kicker: research shows many of us will likely develop a chronic health condition, including dementia. According to the Alzheimer Society, 564,000 Canadians are living with dementia today. In 15 years, 937,000 Canadians will be living the disease. Every year, 25,000 new cases are diagnosed. 

Yet, we don’t have any definitive numbers to determine the true impact of financial abuse of seniors in Canada. In fact, it’s called the “invisible crime of the 21st century” because of how frequently it goes unidentified and unreported. 

A 2018 provincial survey that FCNB conducted found 24 per cent of adults surveyed reported they personally know a senior who has or may have been a victim of financial abuse. However, 66 per cent of those who knew of or suspected financial abuse did not report it, citing a number of barriers that prevented them from doing so. In many cases, they reported not knowing where to turn or how to get help.

Adding to the challenge is that no legislated definition of financial abuse exists in New Brunswick. While the province has legislation that defines physical or sexual abuse, mental cruelty and neglect, there is no legislated definition of financial abuse.

Another challenge is that victims often resist reporting when a family member or caregiver is the perpetrator for fear of retaliation, loss of support, loss of independence, embarrassment and the perceived lack of other options for care.

Unfortunately, senior financial abuse thrives on silence. Perpetrators rely on the fact that their victims are unlikely to report them. But the consequences go well beyond the pocketbook. Being a victim of financial abuse can lead to social isolation, depression, anxiety and other negative health effects.

In fact, the U.S. Centre for Disease Control has called senior financial abuse a “health crisis.”

We need to break the silence. We need to put senior financial abuse on everyone’s radar and be proactive about preventing it in the first place.

At the Financial and Consumer Services Commission, we are working to spearhead change.

A year ago, we released 15 recommendations following extensive research and consultation across the province.

Our recommendations include:

  • Legislative changes around the definition of financial abuse and protections for those who report it.
  • Support for industry professionals who suspect clients may be victims of abuse.
  • Educational initiatives to raise awareness of financial abuse and how to deal with it.
  • Promoting inter-agency cooperation to combat the financial abuse of seniors and other vulnerable people.

Since then, we have been working toward fulfilling these recommendations. We have developed a multi-year senior outreach plan, which also supports our education and communications strategy in raising awareness of fraud and financial abuse of seniors and other vulnerable adults. We have delivered presentations to seniors and their caregivers in nursing homes, churches, community groups and Alzheimer Cafés, and launched a social media campaign on the importance of estate planning in protecting your financial assets. We have distributed some of our printed resources to Service New Brunswick Centres and Seniors Resource Centres across the province, and recently held an event for our regulated sectors, which included an expert panel discussion on senior financial abuse.

We continue to liaise with other regulators across Canada, and internationally on senior and vulnerable investor issues and ways we can work to protect older and vulnerable investors. And we have participated on international, national and provincial committees to advance the protection of seniors from financial abuse.

However, we all have a role to play.

We need to work together as a community to protect the seniors in our lives, and engage in a discussion about senior financial abuse and how we can combat it. Each of use needs to be on the lookout for signs of senior financial abuse, and reach out to a senior who may be isolated and vulnerable.

The challenges are great, but so is the urgency and the advantages of a co-ordinated effort. Lets all do our part to break the silence. 

Rick Hancox
CEO of New Brunswick’s Financial and Consumer Services Commission (FCNB)

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Informed Investor Advisory: Robo-Advisers
by FCNB on 

Are you an informed investor?

Investors are increasingly turning to robo-advisers to help them manage their portfolios. Easy-to-use smartphone apps and online portals make setting up an account with a robo-adviser convenient and quick, which is contributing to their increasing popularity. For those considering a robo-adviser, it is best to take it slow and ensure this type of service meets your short- and long-term investing needs.

What are Robo-Advisers?

The term “robo-adviser” refers to electronic platforms that provide automated investment advisory services to customers pursuant to computer algorithms developed by the platform sponsors.

Robo-advisers thus in effect replace the roles of financial services professionals with computer algorithms. In so doing, robo-advisers may be able to offer useful services at comparatively low cost.

Robo-advisers may be discretionary or non-discretionary – i.e., a customer may allow the platform to execute trades automatically on the customer’s behalf or may withhold trading authority and use the platform’s advice as a mere recommendation for the customer’s own investment decisions.

How do Robo-Advisers Work?

There are two general robo-advisory models: pure and hybrid robo-advisers. The pure model is entirely automated and offers little (or no) ability for customers to receive personalized investment advice from a financial services professional.

In a pure robo-adviser, customers interact solely with the electronic platform. The hybrid model adds a level of human interaction to the robo-advisory platform, allowing customers to work with a financial services professional online or in person. Hybrid robo-advisers generally have higher fees than pure robo-advisers, but may provide greater portfolio customization, tailoring of advisory services, or personal comfort for their customers.

In the United States, robo-advisers can offer pure or hybrid services. In Canada, all robo-advisers operate under the hybrid model. In both models, the level of service provided, and portfolio-building methodology can vary widely. Always make sure that you are comfortable with the type of service and the robo-adviser that you’ve chosen before you invest.

Is Robo-Advising for Me?

Before getting started, shop around and research different robo-advisers’ investment product offerings and fee structures. Just because a friend or relative uses a certain service does not mean it is the right one for you. Robo-advisers use proprietary computer algorithms and software to build your portfolio based on how you answer a questionnaire or interview with a firm representative. Computer programs are unique and different programs can make very different investment and portfolio recommendations, even when presented with exactly the same investor profiles.

Things to Consider when Investing With a Robo-Adviser

Even though robo-advisers offer a service that allows you to take a more passive approach to investing, you should continue to monitor and adjust your portfolio according to your needs. Handing off your investments to a robo-adviser and putting them on autopilot may yield unexpected or undesirable results. It is also important in selecting a robo-adviser to consider the extent to which you will need personalized investment advice or interactions with a financial services professional.

Before you choose to use a robo-adviser, reflect on these questions:

  • Does the robo-adviser build a portfolio based on your financial goals while taking into account your appetite for risk? When you invest, you should always keep track of your investments and ensure your portfolio meets your long- and short-term needs.
  • Are you comfortable and familiar with the types of investment products the robo-adviser will use to build your portfolio? Research and understand the investment products the robo-adviser you are considering uses before you invest.
  • Do you like discussing ideas or asking questions when seeking financial advice? If so, be sure you understand the level of human interaction you will get with the robo-adviser you are planning to use.
  • Do you want the ability to make decisions based on market fluctuations? With robo-advisers, you may not have the ability to buy and sell securities in your account as the market moves up or down.
  • Are you considering any tax consequences that you may encounter for investment losses and/or gains? When investing, you should consider your yearly tax situation. You may want to talk to a tax consultant to better understand how using a robo-adviser may affect you.
  • Are you comfortable and familiar with the robo-adviser’s fee structure and compensation model? You should know how much you are paying for the robo-adviser’s services and how these costs will affect your returns over time.

How to Protect and Inform Yourself

  • Check Registration. Firms that provide advisory services in the U.S. are typically registered with the Securities and Exchange Commission (SEC) or one or more state securities regulators. In Canada, robo-advisers must be registered with the securities regulators in the provinces it operates in. Check the SEC’s Investment Adviser Public Disclosure database or FINRA’s BrokerCheck. In Canada, use the National Registration Search.
  • Check Disciplinary History. Robo-adviser firms in the U.S. and Canada must comply with the laws of the jurisdiction they are operating in. Take a look at the firm you are considering to see if it has been subject to any disciplinary action.
  • Research the Company and its Management. Look at the background and experience of the firm’s leadership. Be sure you are comfortable with the people guiding the investment and business strategy of the firm you are considering. You also may find news on a variety of topics such as its overall business strategy, management interviews, operational matters, or customer complaints.
  • Read Online Customer Reviews. Online reviews will give you a sense of pros and cons of the service. You can get a feel for current or former clients’ satisfaction with the firm you are considering and the services it provides. Understand, however, that portfolio performance is unique to every individual.

The Bottom Line

Robo-advisers are relatively new to the investing landscape. As with any new service, you should thoroughly investigate to make sure they are right for your investment needs. Before making any financial decisions, ask questions and do your homework. For more information, contact your state or provincial regulator. Contact information is available on the NASAA website, here.


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Informed Investor Advisory: Cross-Selling
by FCNB on 

Are you an informed investor?


Cross-selling by banks and investment firms is a growing concern for securities regulators. At its best, this is a way for banks or investment firms to inform clients about the range of financial products and services available. At its worst, this common sales technique can take advantage of loyal clients.

What is Cross-Selling?

Cross-selling, similar to upselling, lures investors into purchasing securities related to the original investment. Cross-selling may be mutually beneficial when done properly, providing best value to the customer and increasing revenue for the adviser, without added marketing costs. However, advisers may try to push a product outside their scope of knowledge, or an unregistered product, which can lead to problems in many cases.

What Might a Cross-Selling Scheme Look Like?

Suppose a pre-existing client is casually approached by their investment adviser or bank representative about a new type of investment opportunity with the investment firm or bank. In this scenario the adviser or bank representative would use the pre-existing positive relationship to influence the client to increase their investments or advance with a new product.

Financial services companies claim this is a fair and highly effective marketing strategy, simply informing the client of the products and programs available to them. However, aggressive cross-selling has been reported as misleading the client, particularly when the client is financially vulnerable, elderly or suffering from diminished capacity, or otherwise easily swayed by sales tactics. If an adviser or bank representative is not acting in the client’s best interest, this could be considered a breach of fiduciary duty.

In several cases, bank representatives steered elderly clients towards the bank’s securities branch, which encouraged the clients to sell CDs and use that money to invest in high-risk investment vehicles.

Investment Adviser A, a previously licensed insurance adviser whose license had been revoked, has partnered with Investment Adviser B to continue working with his clients.

Investment Adviser B offers insurance policies and Investment Adviser A offers private investment opportunities.

Their clients are cross-sold the private investment opportunities, neither Investment Adviser B nor the private investment product is registered.

This scheme is successful for Advisers A and B due to their strong and previously established trusting relationships with their clients.

Unregistered Investment Professionals and Unregistered Products –Federal, state and provincial securities law require both the investment and investment professional to be registered or qualify for an exemption. If either the professional or investment product is unregistered, you should investigate further.

Aggressive Sales Tactics – “once in a lifetime”, “must act now” or “limited availability” are examples of high pressure sales pitches which create a false sense of urgency for investors.

High Returns with Little to No Risk – classic warning sign of fraud, be suspicious of any investment that is said to be risk free.

Unsolicited Investment Offerings – consider the motivation, be careful if contacted about an investment opportunity, when you didn’t request the information from the provider.

Limited Information, No Written Documentation – a legitimate investment should be confirmed in writing. Sloppy offering documents (such as documents with grammatical errors or that appear carelessly put together) should be a warning sign that the offering could be a scam.

How to Protect Yourself

Check with FINRA’s BrokerCheck database and your state or provincial securities regulator to evaluate the bona fides of the financial advisers and offering materials. Regardless of how long you have known a person or been conducting business with an individual, it’s worthwhile to do a quick search in the database to confirm up-to-date licensing and compliance.

Ask questions about the offering and research the ostensible investment opportunity. Find out how the investment will generate returns, time frame for pay out, costs associated, and how your adviser will be commissioned. Enlist the help of a financial professional, lawyer or accountant who is independent from the adviser or bank offering the investment, to help you determine if the investment is a good fit for you.

Be skeptical of high-pressure sales tactics. Sales pitches that seem too good to be true are part of the art of persuasion con artists use against unwitting victims. Know that all investments carry some risk and the higher the return generally the greater the risk. If you are contacted out of the blue, be suspicious, especially if asked to keep the investment a secret. Lastly, resist the pressure to invest quickly, any reputable investment professional should respect your time, allow you to do research and not press you for an immediate answer.

The Bottom Line

Cross-Selling is a very common sales strategy and it’s emerging more into the banking and investment world. Investors may be easily swayed to invest in products not in their best interest. Look out for dubious sales pitches. Before making any financial decisions, ask questions, and do your homework. For more information, contact your state or provincial regulator. Contact information is available on the NASAA website, here.


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