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Top Five Complaints of Investors

Investor complaints continue to flow into securities regulators across Canada, most often stemming from a relationship breakdown between a financial adviser and an investor, reports the Canadian Securities Administrators (CSA), the umbrella organization representing the 13 provincial and territorial securities regulators. Unscrupulous behaviour also continues to arise in the marketplace.

To help investors protect themselves , the CSA lists the top five complaints of investors and how to avoid them:

  1. Suitability - Increasingly, investors are contacting securities regulators after finding themselves in investments that they do not believe are suitable for them. When you open an account with a financial adviser, you must fill out a "know-your-client" form. The form sets out your investment objectives, your level of expertise and your risk tolerance, and it gives your adviser the information he or she needs to decide whether any particular investment is right for you. It is your responsibility to give full, true and up-to-date disclosure of the "know-your-client" information. It is your adviser’s responsibility to make sure that any investments recommended to you are in line with your particular needs.

  2. Customer Service - General customer service issues such as delays in transferring of accounts continue to be a problem. You can reduce delays by getting professional assistance when completing forms and by avoiding transfers during peak season. You can also ask your firm what is the standard transfer time and follow up with them if the account transfer isn’t completed within that time.

  3. Unauthorized Trades - Financial advisers are not allowed to make trades on your account without your permission unless you have given them discretionary trading authority. If you have not given discretionary authority, you should monitor your account to ensure unauthorized trading isn’t occurring. If you determine it has, take action. Unauthorized trading is a serious breach of a financial adviser’s duty of care to his or her clients.

  4. Fees Disclosure - Many investors are still in the dark about fees, and in particular about mutual fund fees. Your adviser should provide full disclosure about all fees and commissions that apply to any investment he or she recommends. You should read any materials provided and ask further questions if you still don’t understand the fee structure of an investment. You can use the Mutual Fund Fees Impact Calculator, found on a number of regulators’ web sites (for example, see the Ontario Securities Commission website) to see how fees can impact on your investment return over time.

  5. Scams and Frauds - There is a growing number of scams and frauds being reported across the country. All investors should be sceptical, prudent and cautious, and should investigate fully any proposed investment before making a financial commitment. Ask questions. Check with your securities regulator to verify the registration of a financial adviser. Read all documents carefully. Above all, don’t fall for promises of high returns with low risk. Report any suspicious activity involving securities or investments to your securities regulator.

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