Dale Jackson

Personal Finance Columnist, Payback Time

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How well do you really know your investment advisor?  

The tie between client and advisor is probably one of the most misunderstood professional relationships. That’s a bit alarming considering they can outlast many marriages and have such a profound impact on how we live our lives.

Here’s what you can, and can’t expect from an advisor.   

What you should expect

• Variety: You should have access to a wide range of investment products as your portfolio grows and strategies become more sophisticated. Some advisors only offer products from one company.
• Risk management: Investing is not all about blowing the lights out. As your portfolio grows, more attention should be paid to consistent returns and wealth preservation.
• Personalized strategy: The know-your-client rule means advisors need to know your level of investment knowledge, your goals, and your ability to deal with risk.
• Ongoing advice: Personal circumstances change and so do markets. A good advisor adapts and even anticipates change.
• Tax efficiency: Sometimes a registered retirement savings plan (RRSP) is the best place for your money. Sometimes a tax free savings account (TFSA) is best. Sometimes the best tax savings are outside a registered account. A good advisor can keep more tax dollars in your portfolio.
• Current information and research: Most retail investors don’t have time to keep on top of market developments. A good advisor is always at the helm and has good research to keep ahead of the trends.
• Fee disclosure: The investment fee structure in Canada is more complicated than necessary – and that confusion works well for the industry. A good advisor will keep you apprised of fees and fee changes.

What you shouldn’t expect

• Guaranteed returns: Anyone who pretends to know how equity markets will perform in the future is either naive or lying. Markets do what markets do, but a good investment strategy outperforms when markets are up and limits losses when they are down.
• Exclusive information: Some advisors can pretend to know more than anyone else, but in most cases, they only have access to information that is already publicly available. A good advisor knows where to find the best information.
• Mind reading: Advisors develop strategies based on the information a client provides. You need to make your objectives and concerns clear.
• Time travel: Some investments go sour. It’s a fact. You made the initial decision together and there’s nothing either of you can do to change it.