DURING volatile times, a financial advisor can be invaluable.
Unfortunately, many investors seem to share a few common frustrations with the service they receive. I'd like to share with you some of the main issues we see in the financial industry that investors should be aware of.
- Transparency in fees
Hidden fees are a major irritation for investors. Clients
are not always provided with an explanation of the fees they will incur. I feel it is very important that clients have the complete picture. If your advisor didn't provide you with a detailed breakdown of the fees you are paying, ask for it now.
- Lack of communication
Some financial advisors only speak to their clients once a year; typically at RRSP time or an annual review. Make sure that your advisor or their team is communicating with you on a more regular basis with market updates and portfolio reviews. It is impossible to effectively manage a client's portfolio if your advisor doesn't know what is going on in your life, so it is important to stay in touch.
- Hiding poor performance
It is important to keep informed on the performance of your portfolio. Your portfolio performance can be skewed by showing favourable returns during certain periods. There are standard times to report returns, such as; year to date, since inception, calendar year returns and one year returns.
- Failure to understand the client
Investors are individuals; just because you are at a certain age or stage in life doesn't mean that you should be cookie cut into a certain investor type. We have clients in their 70s who don't want to own bonds and would rather be weighted in dividend paying stocks. Alternatively, there are clients in their 50s who don't like fluctuations in their portfolio and would be better suited to investing in bonds and GIC's. If you are uncomfortable in the stock market and choose to liquidate your portfolio, I believe that you should not be forced to stay invested.
- Lack of product knowledge
A financial advisor may think they are working in your best interest, but may fail to fully understand the product and the risks associated with it. This can be very dangerous for the investor who is relying on the advisor's knowledge. If an advisor is recommending something besides a stock, bond or GIC, ask questions about the product. If they can't explain it in layman's terms it might be best to stay away from it. If you don't understand it, don't invest in it.
Investors should be aware of these issues to ensure their portfolios are being handled the best way possible.
Lori Pinkowski is a portfolio manager and senior vice president, private client group, at Raymond James Ltd., a member Canadian Investor Protection Fund. She can answer any questions at 604915LORI or [email protected]. You can also listen to her every Friday on CKNW at 5: 35 p.m.
