The Eight crucial things you need to know before choosing a Financial Advisor

Here’s an essential list of questions and answers to refer to so that you can protect yourself from the possibility of financial fraud. The hot topic in the press lately concerns a Montreal man, Earl Jones, who called himself a Financial Advisor but was not officially recognized by the L’Autorité des marchés financiers (AMF). He has defrauded family, friends and clients out of millions of dollars and for the moment, is nowhere to be found.
How could someone be given so much control over other peoples’ financial affairs? What checklist did these individuals refer to before deciding to work with this alleged Financial Advisor?

1. Have you checked the AMF to verify if the Financial Advisor’s license is valid?

   Link to verify:
   http://www.lautorite.qc.ca/clientele/consommateur/registre-entreprises-individus-autorises-exercer/registre-representants-entreprises/recherche-registre-representants-entreprises.fr.html

   
   
2. Does the advisor have professional liability insurance coverage?

   Professional Liability Insurance protects the financial advisor from incidents arising from their services rendered, subject to the terms, conditions and exclusions under the policy. It protects them for liability arising from negligence while rendering or failure to render professional services.

   
   
3. Have you been asked to write cheques to the broker directly?

   If your financial advisor is fee based, they charge a fee for their service you can pay them directly. Otherwise, this should NEVER happen.

   
   
4. Do you receive statements from the Investment Companies?

   The statements should be received directly from the investment company. Their frequency depending on the institution could be quarterly, monthly or semi-annual and they will have your name, account type, account #, invested funds, and maturity date
   (if applicable)

   
   
5. Is the adviser affiliated to an MGA (Managing General Agency)?

   In insurance, a managing general agent is defined legally as "an individual or business entity appointed by an insurer to solicit applications from agents for insurance contracts or to negotiate insurance contracts on behalf of an insurer and, if authorized to do so by an insurer, to effectuate and countersign insurance contracts".

   
   
6. Was there an initial financial fact-finding and analysis done on your current situation?

   CODE OF ETHICS OF THE CHAMBRE DE LA SÉCURITÉ FINANCIÈRE
   An Act respecting the distribution of financial products and services
   [1998, c. 37, s. 313, 1st par., s-par. (1)]

   Division 3
   Duties and obligations towards clients

   15. Before providing information or making a recommendation to his client or to
   any potential client, a representative must seek to have a complete understanding of the facts.

   
   
7. Have you received a report after your financial analysis?

   CODE OF ETHICS OF THE CHAMBRE DE LA SÉCURITÉ FINANCIÈRE
   An Act respecting the distribution of financial products and services
   [1998, c. 37, s. 313, 1st par., s-par. (1)]

   Division 3
   Duties and obligations towards clients

   14. A representative must provide his client or any potential client with the
   explanations the client needs to understand and evaluate the product or services that he is proposing or that he provides to the client.

   
   
8. How is a Financial Advisor compensated?

   Financial Advisers can be paid by salary, commission, a flat fee, or a combination of all these methods. If an adviser is paid by salary, the cost of their advice is built into the products you buy. Most advisers are paid a commission for the products they sell. Others may charge a flat fee based on an hourly rate or a percentage of the assets in your account.

   
   

In summary, by asking the right questions and doing your own homework the chance of you working with a fraudulent broker is greatly lessened.  As a client, pay attention to your accounts. If something sounds too good to be true it usually is, if you feel something is not right, look into it more deeply.  There are resources available to you to ensure you are working with a honest Financial Advisor.

It’s your money, your future so be completely invested in it.

Article by Garen Lewis