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mid section view of a businessman using a calculator in an office (George Doyle/(c) George Doyle)
mid section view of a businessman using a calculator in an office (George Doyle/(c) George Doyle)

Preet Banerjee

Is your financial adviser giving you the runaround? Add to ...

Just because you hire an adviser to provide advice it doesn't mean they are always right. Most people understand that recommendations are recommendations. But when the adviser flat out ignores you, you know you've got a big problem. So when I heard that good friends of mine were getting the runaround from their financial adviser and his company, my blood started to boil.

My friend, the investor, held shares of Nortel and was nervous about continuing to hold them. He asked his adviser to sell the shares should they fall below $34 in price. Although they fell in price, no shares were sold. The investor noticed the price dropped below his target sell price while watching TV with his wife, who was in the hospital being treated for cancer. He didn't call his adviser immediately as he had other things on his mind.

He didn't find out until later that the shares were never sold. Naturally, he was upset and asked his adviser for an explanation. The adviser acknowledged the mistake but persuaded the investor to hang on as analysts expected Nortel's share price to rise. The investor reluctantly agreed but with the stipulation that if the shares were to continue falling and hit $30, that they be sold.

To make long story short, the adviser never sold the shares. Nortel stock kept falling and the investor kept getting the run around. For years. When the investor told me of their troubles, I suggested they immediately make a complaint, explaining that this was negligent behaviour.

Time passed but the firm did not conduct an investigation. Since there were no notes on file concerning discussions about selling Nortel and the adviser had now changed his story and denied ever having discussions about selling the stock, they sided with the adviser. The investors never heard from the adviser again and the branch manager was assigned the account.

The investors are following up through a second stage complaint procedure with the Ombudsman for Banking Services and Investments (OBSI), but even if they rule on the side of the investor there is some question as to whether or not the decision would have any impact.

What makes this case difficult to access is there was no transaction made (which is the point) and no notes concerning any conversations about selling Nortel on the adviser's client file. So it has become a “he said, she said” situation.

Financial advisers are supposed to document every material discussion they have with an investor. Usually they are urged to do so from internal compliance officers who want to make sure that when, not if, they eventually get a complaint there is documentation to support the appropriate actions were taken.

But in this case we are looking at a transaction that was never made.

If disputes are investigated, one of the things looked at are the consistency of the adviser’s notes. Some document things better than others and the ones who regularly attach notes to client files in a timely manner are going to stand a better chance under scrutiny than the ones who don't.

But there is something investors can do to help their cause - they can make their own notes. The Canadian Securities Administrator provides this handy worksheet you can download for free to help you make notes on any conversation you have had with your adviser. You should make notes of any material discussions you have with your adviser, date them and store them with your other records.

Investor disputes are hard fought cases in Canada, but with lots of money on the line it pays to take the time to make your own notes. It may not even the fight, but it's certainly better than doing nothing.

You hire an adviser to give you advice, but it's ultimately you who makes the decisions. Not the adviser.

Preet Banerjee, B.Sc, FMA, DMS, FCSI is a W Network Money expert and blogs at wheredoesallmymoneygo.com . You can also follow him on twitter at @PreetBanerjee.

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Follow on Twitter: @preetbanerjee

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