Getting Quality Investment Advice

Investment and savings for the future can come in a variety of forms. The most common are so called:

• Fixed Investments, like GICs, Mortgages and Savings Bonds
  
• Market instruments like bonds, stocks, mutual and segregated funds and a variety of other specialty or “packaged” financial instruments. Lastly, there is
• Real estate, both commercial and residential real estate.

As high-profile investment schemes continue to dominate news headlines, we need to warn investors to be cautious in selecting financial advisors.

We urge investors to be cautious of advisors offering unrealistic or consistent returns on an investment with instruments that are clearly subject to variation in performance commensurate with market movement. Such promises are fundamentally contrary to the very nature of a stock market. Stock markets as well as commodity and real estate markets go up and they can go down. Legitimate results vary. The financial “pundants” call this historical up and down movement  in the market or a particular investment instrument “volatility”.

The key questions you need to about any investment decision.

• Liquidity – How, when and under what circumstances can I access and convert my investment to cash? Lack of liquidity is, in of itself, not a bad thing; not being aware of the level of liquidity and the consequences of converting to liquid asset is the real issue.
• Time Horizon – While often not precise, each investment type tends to have a optimum period for maximum return on investment. Advisors should be able to categorize for you the time horizon, be it short, mid or long term. This way you can match your time horizon with that of the investment instrument more appropriately.
• Volatility -  A general rule of thumb, that not always holds true, is that the greater the volatility of an investment the greater the potential for higher returns over course of time.  A short time horizon for your need to liquidate the investment the greater the risk that the investment be in a negative cycle when you need to liquidate., creating a significantly lower growth or even a loss. Long term, the higher returns will lessen that risk.
• Expenses – Expenses include, commissions, management fees, transaction fees, account fees, etc. You should be aware of what these are and how they impact on the return. If the expenses are inclusive of the returns, eg. The rate of return is after fees and expenses and you are happy with the returns, its less of a problem. But keep in mind the fees are constant even in down markets. Reasonable fees are reasonable and expected and should not be begrudged. Hidden, unexplained and extraordinary fees should not be tolerated.
  
  
  

Warning signs to be aware of in deciding to do business with a particular advisor.

· pressure from an advisor to invest beyond someone’s comfort level. An ethical and responsible financial advisor or planner understands clients’ financial goals and objectives and risk tolerance.

· a promise of exclusivity or a “special deal,” -  legitimate investment opportunities are generally available to a wide range of clients.

· Each investor is their own best advocate. They should take the necessary steps to research, verify and question the advisor and his recommendations.

Here are a few steps investors can take to prevent being a victim of fraud.

1. Investors to do research by getting referrals from other clients and determining whether the advisor has a license and the necessary experience to have your best interests at heart.
2. Verify all the information gathered. We urge investors to verify that the money invested is going to a legitimate third-party like a bank, and that statements include key information such as a street address and a list of investments and activity over a period of time.
3. We recommend that investors verify with the appropriate licensing body that the advisor is duly authorized to do business in the province.
4. Finally, investors are urged to ask questions of the advisor. A fraudulent advisor may refuse to answer questions or may dismiss questions by stating that it’s too complicated to explain.  Another reason to refuse to answer questions is incompetence. Either way, not a good basis for a relationship.~