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Tips on how to deal with an investment advisor for your RRSP

by Wayne Cheveldayoff, 2007-02-22

To successfully deal with an investment advisor, you have to understand the core of the relationship.

From your perspective, you mainly want help structuring a portfolio and choosing investments that will increase your RRSP savings to the point you can retire (early, hopefully).

From the advisor’s perspective, he or she wants to make money on your relationship. The advisors aren’t not doing it for fun or because they are “nice.”

If they are nice to you, it is because they want to attract and profit from your business.

Keep in mind that advisors are sales people, licensed to sell securities and insurance.

Thus, everything they do, whether they brag about how well their clients are doing, or tell you about the volunteer work they do, or say how they can help you save income taxes, or compliment you on something, it is all focused on making you like and trust them so that they can “manage” your money in ways that give them and the firm they work for the most in fees and commissions.

Once you understand and take into account where the advisor is coming from, then you have a good chance of benefiting from the relationship without paying too much for what you get.

So, what tips about dealing with investment advisors does this lead to?

First, acknowledge that trust is not enough. If you are relying only on trust in your relationship with an investment advisor, you may be in for a surprise at some point.

Advisors may go along doing the right things in your interest for months or years and then, under pressure to earn commissions, shift to putting their own interests ahead of yours.

If you doubt this point, just ask Stan Buell, president of the Small Investor Protection Association, who himself was subject to advisor abuse and after listening to many other investors and lobbying regulators for changes over the years, his conclusion is that everyone dealing with an investment advisor is at risk – and not just market risk.

He traces the problem to how the industry is set up, with conflict of interest pervading the relationship between the industry and the investors it is supposed to serve.

You may be wondering, if trust is not enough, what should you do?

The answer is ask, require, verify -- ask a lot of questions to understand all the potential consequences of what you are doing in your portfolio (it is not the advisor doing it, it is you, since your approval is needed), require everything in writing, and verify from the documents everything the advisor says.

You will want a written investment policy, a system of calls and meetings to regularly monitor your portfolio, full disclosure of all fees and commissions that apply (even if you don’t pay them directly and they are paid directly by the supplier of the investment product) and full control over the initial input and any changes made to the Know Your Client (KYC) from that each advisor must fill out to justify the securities bought in your name..

If the advisor does not make you feel comfortable in asking for and receiving this, look for another advisor right away. If there are delays or reluctance, there could be selfish reasons for it.

Don’t procrastinate on this, as waiting around in an unsatisfactory situation is almost always costly in terms of lower returns or excessive fees and commissions.

A good way to search for an advisor is to contact the branch managers in your region of at least three larger full-service brokerage houses (where advisor compliance is strictly enforced and the firm has resources that can be tapped if you have to sue for malfeasance) and ask for a recommendation of a good, honest advisor that fits your requirements. Interview at least three such advisors and then decide if any are worth it.

Yes, this takes up a lot of your time, but it’s your money and nobody will care for it better than you do.

And while we’re on the question of whose money it is, survey results suggest that a couple should have two advisors, not just one.

A Merrill Lynch study found that men and women invest differently and different styles usually require different advisors to get the right fit. Since the study found that women make fewer mistakes and don’t repeat them as often, having two advisors would amount to a good diversification strategy for a family’s portfolio and one that could mean more money to play with upon retirement, which in the end is all that this is about.

Wayne Cheveldayoff is a former investment advisor and professional financial planner. His columns are archived at and he can be contacted at

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©2007 Wayne Cheveldayoff