They're the people thousands of Canadians rely on as they build their finances and execute their investment plan. They're financial advisers – professionals who provide investment advice and help Canadians buy and sell investments.
Almost half of investors in Canada work with a financial adviser, according to the latest survey by the Canadian Securities Administrators (CSA). CSA chair Bill Rice says it is critical for investors to understand the role of a financial adviser as well as the investor-adviser relationship.
"Having a clear understanding of their and their adviser's roles and responsibilities can help investors avoid potential disputes," says Mr. Rice, who is also chair and CEO of the Alberta Securities Commission. "It also helps minimize their risk of being involved in a potential scam."
Investors should always check the qualifications and background of a financial adviser and investment firm before entering into a client-adviser relationship, says Mr. Rice. The CSA provides many resources, such as Are They Registered, that can help investors check if the adviser and firm are registered with the appropriate securities regulator, and if they have engaged in any activities that resulted in disciplinary action or cease trade orders.
Knowing what they can and should expect from a financial adviser is also key, says Mr. Rice.
"For instance, investors can expect their adviser to make clear and specific recommendations and explain the reasons for the recommendations," he says. "Advisers should also be able to point out the strengths and weaknesses of opportunities and recommendations, and to outline the risks involved."
Investors should also know what not to expect from an adviser, says Mr. Rice. For example, advisers should not attempt to predict market performance with certainty or recommend "always profitable" investments. They also should not promise unrealistic results.
"If an adviser starts to venture into some of these areas, investors should know they may be headed for trouble," says Mr. Rice.
But advisers aren't the only ones who need to be mindful of their actions. Investors, too, have an important and active role to play in the investor-adviser relationship.
"It is important that investors' due diligence and communication do not end when the first cheque is signed over to an adviser," says Mr. Rice. "Investors have a responsibility to make sure they continue to be informed."
From the start, investors need to be clear and honest about their financial situation and expectations, says Mr. Rice. They should be proactive and ensure they're prepared for each meeting with their adviser by reviewing relevant information in advance.
"Ask questions if you don't understand something and take notes," says Mr. Rice. "Be informed about your current and potential investments, and review your transaction confirmations and account statements to make sure they are accurate."
Investors should also inform their adviser right away about any changes in financial circumstances or significant life events, such as the birth of a child or the death of a spouse or partner.
"In investing, knowledge is power," says Mr. Rice. "Research, due diligence and communication are key to a successful investor-adviser relationship."
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.