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Financial advisers can make all the difference in ensuring investors meet their goals. Yet many Canadians don't take the time to check credentials and background before choosing their investment guide – an oversight that puts them at risk of investment fraud.

"Many people spend more time researching their phone or TV subscription than researching their financial adviser," says Lorinda Brinton, chair of the CSA's investor education and committee, and senior advisor, investor education at the Alberta Securities Commission. "This is the person you're going to be investing your money with – it's a critical decision that requires due diligence."

A 2012 survey by CSA found only 40 per cent of Canadian investors have done a background check on their financial adviser. In many cases, says Ms. Brinton, investors fail to do due diligence because they don't know how or where to find information about an adviser.

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"There are two key questions investors need to ask: are the adviser and investment firm registered, and have they ever had any disciplinary action against them that you'd want to be aware of?" says Ms. Brinton.

CSA has online resources that make it easy for investors to get answers to these questions. As a starting point, says Ms. Brinton, investors should visit the organization's Are They Registered page, where they can check if an adviser or investment firm is registered with the appropriate provincial or territorial securities regulator – a requirement for anyone trading securities or in the business of advising clients on securities.

Also available in French, Are They Registered taps into a database of all registered individuals and firms in Canada

Once they've verified registration, investors should check if any disciplinary decisions or cease trade orders have been issued against individuals or firms.. A quick way to do this is by visiting the CSA website and searching through the disciplined persons list, investor alerts, and cease trade orders database.

Beyond the CSA website, Ms. Brinton suggests doing a broad online search, which might uncover news stories about the adviser or investment firm. Investors should also do a thorough interview with the adviser.

"Look into how long the firm has been around, and how long the person has been selling securities," says Ms. Brinton. "Ask how they're paid – is it salary, fee-based, or commission-based – and watch for red flags. If they're getting paid by referral, for example, or are pressing you for referrals, then that could be an indication that it is a ponzi or pyramid scheme."

If in doubt, contact the CSA or your local securities regulator, says Ms. Brinton. Knowing your adviser is an imperative not only for those choosing a new financial adviser, but also for those who already have one.

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"There are plenty of resources and tools to help people do this," she says. "You don't have to work your way through this by yourself."


Canadian Securities Administrators

Securities regulators from each province and territory have teamed up to form the Canadian Securities Administrators, or CSA for short. The CSA is primarily responsible for developing a harmonized approach to securities regulation across the country.

www.securities-administrators.ca

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