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Dale Jackson

Your Personal Investor

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A growing number of complaints from investors about the advice they are getting has Ottawa taking notice. The Financial Consumer Agency of Canada has moved up a planned review of the financial sector to this month.

That’s a big deal for an industry that prides itself on being self-regulated. At the heart of the problem is the “know-your-client” rule – a requirement for advisors to only recommend investments that are appropriate for their clients. 

Many of the complaints relate to investors being sold products that compensate the advisor but have little to do with their specific investment goals or investment knowledge.

Advisors are required to abide by the know-your-client rule by providing a form for clients to fill out before advice is given, and updated each year.

According to the Investment Funds Institute of Canada (IFIC) here’s what advisors should know about their clients before making a recommendation:     

  • Marital status
  • Age
  • Occupation
  • Income and net worth
  • Number of dependents
  • Risk tolerance: from low (which means you are willing to accept lower returns to ensure your money is safe) to high (which means you are looking for significant growth in your money, and you are willing to see your holdings drop in the short-term if it gives you a better chance of earning higher returns over time)
  • Investment objectives: for example, you would like your investments to provide some income on a regular basis, even if your capital gains are not as high. Or, you are looking for capital gains over time and you do not need the funds to generate income in the short-term.
  • Investment knowledge and experience: from excellent to low or nil
  • Investment time horizon: how long you intend to leave your money invested

Your answers to these questions should be written down and you will be asked to sign a form to confirm that the information is correct.