Most people know they have a right to expect their adviser to act in their best interest. But what does that mean?
Seven things you can expect your adviser to do
- Give you helpful, informed, responsible advice.
- Be patient and clear when they answer your questions.
- Tell you about any major changes to your investments.
- Keep in touch with you through newsletters, e-mail, phone calls, and meetings.
- Tell you about any conflicts of interest. They must recommend investments that fit your needs and goals, not theirs.
- Tell you, in writing, about any transactions they make on your behalf.
- Send you regular statements about your account. In most cases, you will get a yearly report and updates every three months. You may also get a statement for any month you buy or sell investments.
How do you know if your adviser is NOT working in your best interest?
- You rarely hear from your adviser: Do you only hear from your adviser when they know you might have money to invest? Then ask yourself if your adviser is interested in you or just their fees.
- Your adviser's suggestions don't seem to match your goals: When you first meet, your adviser should ask you about your goals. They should explain how an investment will fit those goals.
- Your adviser makes frequent or unusual trades: Watch out for trades that don't really help you get ahead. Is your adviser suggesting you should trade one investment for a similar one? For example, do they recommend you switch from a mutual fund with a back-end load to a similar fund with a front-end load? Make sure it's not just to make a fast sales commission.
- Your adviser uses high-pressure sales tactics: Sometimes an adviser will push a certain investment because they stand to gain an extra fee.
- You get a letter from your adviser's firm: Your adviser's firm monitors the trading that your adviser does for you. They may write to you if they notice something unusual. Unless you've asked for a lot of buying and selling, something may be wrong.
Tip: If you believe your adviser is not working in your best interest, you may want to consider either making a complaint or changing your adviser.
Remember: Know your rights and responsibilities
Sometimes it's the little things that make an adviser relationship work. You'll benefit if you have an adviser who acts in your best interests. Your adviser will benefit if you know how to be a good client.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.