Under the guise of a trusted friend and financial advisor, Ian Thow persuaded his clients to invest in a number of schemes. The B.C. former mutual-fund salesman conned his clients, friends and family out of millions - some lost their entire life savings. "I find Thow acted without conscience, a rampant sense of entitlement and unabashed greed that has profoundly changed the lives of his victims," said the judge who presided over the case. Last week Mr. Thow pleaded guilty to 20 counts of fraud and was sentenced to nine years in prison.
Although the vast majority of financial advisers are good, honest professionals, cases like those of Mr. Thow and disgraced Montreal financial adviser Earl Jones have illustrated that Canada is not immune to financial fraud. According to recent research from the Canadian Securities Administrators (CSA), more than a million Canadians have lost money in an investment fraud. And we're all the more likely to become a victim when a fraudulent investment opportunity is presented by someone we trust.
We should trust our financial advisors - I know I trust mine - but just how well do we know them? And if we are presented with an investment opportunity, do we know how to determine if it's legitimate or just too good to be true? Here are a few suggestions to help you with those questions:
1. Think locally. Finding an advisor in your area and meeting them in person when you want or need to will go a long way towards feeling comfortable with them. Face-to-face meetings are a key element in building and maintaining trust. If you're looking for an advisor or looking to make a move, refer to this list of suggested questions to ask an advisor and his or her references. Hiring locally is the number one golden rule for hiring a financial advisor, says financial guru David Bach. In his book Smart Couples Finish Rich, he says if you're going to put your money into the hands of a financial coach, there is no substitute for meeting personally.
2. Background check. Financial planning is not regulated in most Canadian provinces, so anyone could potentially refer to themselves as a "financial planner." If you see CFP - Certified Financial Planner - then this individual has met high standards of financial planning professionalism and abides by a Code of Ethics, which is enforced by Financial Planners Standards Council. Always check to see if your planner has earned this designation and, equally as important, is good standing. If you're presented with an investment opportunity, ensure the person or company offering the investment is registered to provide the services offered. Also, make sure no complaints have been made or disciplinary action taken against your see your current or prospective advisor.
3. Re-assess the relationship regularly. Make sure your planner is aware of your needs as they change. Also, if you have family members who you think are at risk of being taken advantage of due to age or emotional or physical conditions, touch base with them or their adviser to ensure their best interests are being served.
Selecting the right advisor, doing your homework and taking some time to educate yourself are all part of protecting and growing your life's savings. Visit CSA online and click on your province or territory for more resources when it comes to investing and working with an advisor. Just like any other profession, there are good advisors and there are bad advisors. After you find the right advisor, your job doesn't end. Make sure to maintain a relationship and to do your due diligence so that your life savings and your family's security are not in jeopardy.