Guaranteed Investment Certificates (GICs) not always guaranteed
Ross McLaughlin and Sandra Hermiston, CTV Vancouver
Published Tuesday, May 30, 2017 6:00AM PDT
Investors usually turn to guaranteed investment certificates or GICs because they are low risk and low drama. But one man was shocked to learn more than $1 million of his money could be at risk, after investing in what he thought was a secure GIC.
Bod Bidner wishes his financial advisor had been clearer about what guaranteed meant before putting his $1.17-million profit from a condo sale into a GIC with Home Trust.
“I thought I did the right thing,” he said.
But all that was guaranteed was the 1.75% interest rate with a promise to pay at the end of 18 months.
And as Home Capital Group, the holding company that operates Home Trust, saw its shares plunge after allegations of possible fraud among mortgage applications, Bidner’s worries about the future of his investment only intensified.
“There really is a concern as to whether or not Home Trust will be there down the road so there's a lot of exploration into what's covered under CDIC," said Pattie Lovett Reid, CTV News chief financial commentator.
The Canada Deposit Insurance Corporation only covers up to $100,000 in GICs and doesn't protect money in GICs that have a term of longer than 60 months.
According to the Consumer Financial Agency of Canada, disclosure on term deposits or GICs must be provided orally and in writing, including all terms and if the product is not insured by the CDIC.
“I wasn't given all the information. Had I been told that I was secured to $100,000 I would never have invested in that," Bidner said.
“I called the advisor that put me into this and started demanding my money back.”
His advisor works for Investors Group, which has now launched an investigation. They told CTV News that if there is a loss and: "we did not meet our obligations, we would take responsibility for any loss caused by us."
Home Capital Group continues to meet its obligations but it’s still not enough to give Bidner peace of mind. He can't redeem his deposit until October and he wants to warn consumers before investing in a GIC.
“I’d like it to say guarantee investment certificate up to $100,000,” he said.
"Even if it's cash or a near cash equivalent like a GIC, you really need to know the details and that includes the strength of the financial institution you're investing with," explained Lovett-Reid.
McLaughlin on Your Side reached out to several regulators about the issue. The general consensus is to fully protect a client’s money you wouldn't invest more than $100,000 in one GIC but would spread it around into several insured accounts.
We also asked Home Capital Group if it would redeem Bidner’s GIC early. It didn't respond to that but did offer to transfer $100,000 his GIC into a Home Trust deposit account which would be CDIC insured. That would fully protect $200,000 of his investment.