Be straight with your financial advisor about what you expect

Originally published in the Vancouver Sun on March 18th 2010. To go to the Vancouver Sun website, please click here.

Every month for about 15 years, Georgetown, Ont., resident Bob Lawrence would grab the phone and conference with his financial advisor. They would discuss what was hot and cold in the markets and what were the “best” next moves. However, while the arrangement was to be mutually beneficial, over time Mr. Lawrence had his doubts.

“I may not have lost money on the advice, but I certainly did not make money on it. Probably a financial advisor is acceptable for the investor who does not have the time or the inclination to do their own investing,” says Mr. Lawrence (Not his real name).

So about 10 years ago Mr. Lawrence — now retired — became his own financial advisor. He does his own research and implements his investment strategies. He is part of the growing number of Canadians who are taking a sober second look at their relationship with their financial advisor. While most relationships are healthy and profitable, others, especially since the market downturn of 2008, need some fine tuning.

Perhaps the most common problem in the client-financial advisor relationship is harmonizing investment expectations.

“It is incumbent upon Canadians to set expectations on how they want their relationship with their financial advisor planner to work. [This should include] what’s expected — and maintaining open communications,” says Tamara Smith, vice-president marketing and consumer affairs for the Financial Planning Standards Council (FPSC), the licensing body for the certified financial planner designation in Canada.

There are more than 17,500 licensed CFP professionals with the accreditation.

According to Wendy Connors-Beckett, senior communications specialist at the New Brunswick Securities Commission the key to a quality client/ advisor relationship is the “Know Your Client” document, which forms the basis of their relationship. Advisors are required to complete this form with the client. The form contains information about risk tolerance, financial situation, investment objectives, investment experience and knowledge. The form provides protection for both the advisor and client and it helps the advisor know which investments are best suited to their client.

RBC Royal Bank adds the Your Future by Design ( that helps start the client-advisor relationship on the right foot.

“That helps those approaching retirement clarify their vision of their future and start to think about what life areas will be important in retirement. For example, we ask clients to think about the day-to-day activities that will give them the most satisfaction in retirement,” says Michael Walker, vice-president and Head of Branch Investments, RBC Royal Bank.

And when there are dramatic changes in the market place, it is this mutual understanding of the needs of the client that can produce the best possible outcome. Should things really sour for clients, there’s not a lot of recourse.

Certainly, The Financial Planning Standards Council will investigate complaints about financial planners who carry the organization’s designation. Disciplinary actions can be anything from letter of admonishment in our files up to taking their licence away from them. But if they are outside of the FPSC designation, it’s buyer beware.