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Report On Business Eight ways to improve your relationship with your financial adviser

Bad adviser behaviour is coming to light as a result of new investment industry disclosure requirements, but so is something we might call the bad client problem.

Some people can't be satisfied. This isn't just a matter of advisers – ask people in any service-based business and you'll hear the same thing. But changing advisers requires you to find new people, interview them and choose the best fit. It's much less work to try and repair a relationship with an adviser than to kill it and find someone else. Want a better adviser? Try being a better client.

The new disclosure rules in the investment business require firms to show clients the advice fees they pay in dollar terms, and personalized rates of return going back at least one year. If you have an investment account, you may have already seen this information on your 2016 statement. If not, hold tight. This info is coming your way.

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As noted in a recent column for Globe Unlimited subscribers, the new rules are working well in getting people to pay more attention to all aspects of their investments, not just advice fees and returns. Several instances of bad adviser behaviour were detailed in that column, and here's a fresh one that just came in.

A guy e-mailed me last week about how his elderly dad was sold mutual funds with a deferred sales charge, where you pay a fee to sell in the six or so years after you buy. This is advisory behaviour straight from the gutter. Let's stamp it out by complaining not just to journalists, but also to these advisers, their branch managers and their compliance departments.

But let's also recognize that some advisory relationships are coming undone as much by the client's behaviour as the adviser's. One individual I heard from recently had gone through six different advisers. A few others were frantic about the fees they were paying, as if they were buying a car and cared only about hammering the price down as much as possible. Let's look at eight ways to do your utmost as a client to make the advisory relationship work. A good client …

Wants her adviser to be appropriately paid

Good advice deserves fair compensation.

Understands that shopping for advisers on the basis of the lowest fees is a dead end

Look for reasonable, competitive fees in the context of services provided. Our online fee comparison tool stands ready to help Globe Unlimited subscribers find out how their advice fees compare.

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Doesn't judge investment results by one year's return

Three years is a better slice of time, and five years is better still; the overarching question is whether you're on track to meet your financial goals.

Doesn't expect the impossible

Examples of the impossible include returns close to 10 per cent every year, and no down years.

Understands the differences between having an adviser, DIY investing and using a robo adviser

Do-it-yourselfers pay no advisory fees, but are entirely on their own in making decisions about investments, portfolio building, taxes, estate planning and more; robo advisers manage investments, but for the most part offer no financial planning; working with an adviser ideally gets you financial planning plus investment advice.

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Understands that no one's infallible in finance

Mistakes are inevitable. What counts is that successes have much more impact on you than the mistakes.

Recognizes that small portfolios will get less attention

Always ask an adviser what level of service you can expect with a portfolio like yours; a robo adviser may be a better fit for small accounts – let's say below $100,000.

Understands that advisers may not want a client who moves around a lot

Why invest time in building a relationship with someone who has expectations that can apparently never be met?

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Some people can't be satisfied with their adviser because that's how they are. But discontented clients are the investment industry's fault, too. This is an industry that:

  • Won’t accept a uniform fiduciary standard (client interests come first);
  • Won’t adopt uniform accreditation for advisers;
  • Had to be forced to improve disclosure of investment fees and returns;
  • Puts way more emphasis on selling products than providing advice.

Unrealistic clients are the natural result of this kind of corporate behaviour.

In January 2017 investors will see reports on fees paid to advisers and investment firms. But the second phase in the Client Relationship Model won't include all the costs you pay. Preet Banerjee looks at what will and will not be included.
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