Would you recommend your financial adviser?

by Natalie MacLellan on June 25, 2009

in In the News, Working with an Adviser

It’s been a bleak year on the markets, and that appears to be taking its toll on investors’ relationships with their advisers. Canadian investors are showing their dissatisfaction by withholding recommendations to friends and family members.

Twenty-four per cent of investors participating in a recent J.D. Power and Associates survey said they would “definitely” recommend their primary investment firm, down eight per cent from the year before. Ten per cent of investors said they were considering switching advisers this year, compared to six per cent in 2008. (Read more in the Globe and Mail.)

Are advisers taking too much of the blame for the market downturn? While some advisers who get the boot may well deserve it, it is worth considering whether Canadian investors have realistic expectations.

Think of your relationship with your adviser as a partnership, with both of you working to achieve your financial goals. You are both responsible for making this work. And like any relationship, open and honest communication is key.

What you should expect from your adviser

The role of your adviser is to give you helpful, informed advice as you build and carry out your plan. Your adviser is obligated to act in your best interests at all times and to recommend investments that are suitable for you.

To do this, your adviser will need to take the time to get to know you and get a clear understanding of your financial situation, your goals and how you feel about risk.

Once your plan is in place, your adviser should tell you about investment opportunities, as well as any changes that could affect your investments. Your adviser should be available to answer your questions, especially during market lows when you may be tempted to act on your emotions.

You can expect your adviser to:

  • make clear and specific recommendations
  • explain the reasons for the recommendations
  • point out the strengths and weaknesses
  • outline the risks involved

Your adviser must get your permission before they take action like buying or selling investments for you, or withdrawing money from your account. The only exceptions are if you have given your adviser “discretionary” authority or you have given someone else trading authority or power of attorney over your account. Your adviser will send you a written confirmation of any transactions they make for you and will send you regular account statements.

What you should not expect from your adviser

Your adviser will not be able to:

  • predict the performance of the markets with certainty
  • recommend investments that are always profitable
  • act on vague or general instructions to buy or sell investments
  • meet unrealistic goals or expectations of profit

For more tips on working with an investment adviser, read the CSA’s Working with a financial adviser brochure.

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