Unveiling the Secrets: How Does Your Advisor Really Choose Your Investments?
Hi, !
How do you ensure that the advice you’re receiving from your professional advisors is genuinely in your best interest? With many professionals being compensated based on the products they sell or the time they spend, rather than the outcomes they achieve, it can be challenging to discern who to trust in making crucial decisions.
Recently, my wife and I discussed how doctors in Canada are compensated, which, turns out, is largely based on a per procedure or test basis. This conversation sparked thoughts about compensation structures across various advisory services, including those in the financial and investment realms.
Consider this: If your doctor is paid per test rather than based on the health outcomes, and your investment advisor earns by the trade, are they truly prioritizing your best interests?
Coincidentally, I came across an article on Advisor.ca last week questioning whether financial advisors should adhere to a Hippocratic Oath and better define their fiduciary responsibilities. While it’s a step in the right direction, I believe that most financial advisors aren’t intentionally placing clients into suboptimal investments or choosing options with higher fees.
Many Canadians default to major financial institutions for investment advice due to convenience or familiarity, trusting these large corporations to safeguard their assets. However, with recent changes to the “Know Your Product” legislation, these institutions have restricted or limited the availability of third-party funds. This restriction often leaves clients with limited investment choices. They have determinted that overseeing the proficiency of all their advisors is too difficult, or there is a lack of proficiency.
So, how can you protect yourself and ensure access to the best investment options available?
Start by asking questions. Your advisor should be able to clearly explain the rationale behind each recommended investment and discuss other options that were considered or discarded, including any that might have been less costly. Remember, less expensive doesn’t always equate to better, but it’s crucial that your advisor explores all available options.
Before making any investment recommendations, our team inputs a series of qualifications into our third-party software to identify the best fit for each client. This software evaluates potential investments based on criteria like short-term and long-term performance, fees, dividend scales, and consistency. Access to a wide range of investment choices allows us to develop tailored solutions beyond the proprietary limitations often imposed by larger entities.
Until next week, Happy Investing!
Trevor
In Lighter News:
Adrian and I took part in the Paris to Ancaster race yesterday. Although you are more likely to find us moutain biking than gravel or road riding, this turned out to be a fun, yet challenging experience. The P2A was a combination of road, gravel, farmer’s fields, and mud slides over a 70 km distance.
