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4 tips for building a successful relationship with your investment advisor

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DH Vancouver Staff Feb 25, 2016 6:30 am

With this year’s RRSP deadline looming, you might be wondering how best to invest your hard earned dollars for the future. Once you’re earning enough money and have some savings, suddenly you’re blindsided by reality: you’re ready to invest, but how to get started? And who should you trust to help you?

If you’re looking for advice from an investment advisor, the BC Security Commission’s National Smarter Investor Study reveals some pretty sobering statistics you should know.

89% of investors say they have a strong level of trust in their investment advisor. That’s a good thing, but trusting your advisor shouldn’t stop you from asking hard questions and generally doing your own due diligence. That means asking about the fees you pay for each investment product you buy and asking the advisor how they are compensated for those investments. In fact, almost three quarters of people don’t ask their advisor about fees and compensation. But without asking those details, you expose yourselves to the risk that the fees you pay will eat away at your returns, without you ever knowing it.

As well, nearly half say they don’t read their investment statements because they trust their advisor is taking care of their money. This blind trust can cause investors to give up one of their key responsibilities: to pay attention to their investments and be actively involved with their advisor.

With these insights in mind and RRSP season upon us, here are BCSC’s top 4 tips for building a successful relationship with your investment advisor.

1. Ask questions, especially about fees

Financial questions / Shutterstock

Financial questions / Shutterstock

The recent BCSC study shows investors don’t always do what they should when working with an advisor. Investors agreed most that it was their responsibility to ask questions, but far less that it was their responsibility to understand the fees they pay or do their own research on new investments recommended by their advisors. Look into your fees and take time to understand any new investments to stay on top of your game.

2. Look into your advisor’s background

Background check / Shutterstock

Background check / Shutterstock

According to the study, a quarter of Canadians report never having asked their advisor about the compensation they receive. Even worse, less than half say they conducted a background check on their current advisor before they began working with them. If you avoid making these mistakes you can save yourself a lot of hassle.

3. Know your responsibilities as a client

Responsibility / Shutterstock

Responsibility / Shutterstock

It’s your responsibility to communicate clearly about your financial situation, investment goals, and risk tolerance. You also need to make sure your advisor is kept up to date with any changes to this information. Pay attention to the information you receive from your advisor – including account-opening documents, research materials, transaction records, and statements – to make sure the only transactions and fees on your statements are ones that you approved.

4. Find a reliable source of information 

Statistics / Shutterstock

Statistics / Shutterstock

The Smarter Investor page on BCSC’s InvestRight.org has a collection of tips, advice and helpful tools for investors—everyone from first-timers to seasoned pros. Especially useful is this worksheet that lists all the right questions to ask your financial advisor. Print it out and bring it to your first meeting.

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D8d194f40cb13417f79d4d8daee34fdb?s=96&d=mm&r=g
DH Vancouver Staff
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