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Are Canadians 'too polite' to question their financial advisors?

[A financial advisor can be very helpful, but you shouldn't blindly trust the person handling your money.]
[A financial advisor can be very helpful, but you shouldn’t blindly trust the person handling your money.]

Canadians are highly trusting of their financial advisors according to a new survey by Hennick Wealth Management. Of the 1,067 Canadians surveyed, a third reported using a financial advisor with only one in five disagreeing with statements like “my advisor can be trusted to act in my best interests” and “my advisor understands investments much better than I do.”

But Adam Hennick, investment advisor at Hennick Wealth, says it may not be a good thing that 95 per cent of Canadians are confident in their advisors. To Hennick, it looks a bit like investor apathy.

“As Canadians we’re too polite, we don’t ask questions like how have we done?” he says. “(Investors) are afraid because they don’t want to seem like they’re too lax in their finances.”

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According to the poll, when asked to pick the top three people most trusted to make financial decisions on their behalf, 61 per cent of Canadians selected financial planners, 58 per cent picked accountants, 54 per cent chose investment advisors and 47 per cent trusted bankers.

Canadians displayed a similar confidence in their advisors and more specifically their advisor’s credentials in a recent poll by the Canadian Securities Administrators (CSA) – the umbrella organization representing the provincial regulators. The survey of nearly 4,300 found that three-out-of-five Canadians don’t bother to check if their advisors were registered despite the fact the majority of those surveyed say they feel it’s worthwhile to know.

“I think part of it is large financial institutions, especially in Canada with six large banks owning brokerage firms,” he says. “There’s a belief that you’re in good hands with large firms.”

He points out that the confidence isn’t a bad thing – whether you’re with a larger firm or a boutique advisor, you should be confident with who is managing your money – but you should ask “a few common sense questions.”

In a situation where you’re searching for a new advisor, once you’re comfortable with the individual he recommends asking if they can show you examples of the type of account you would have with redacted names to get a feel for the type of investment returns you could expect.

“Accounts that have been with them for a long period of time (to gauge) performance – how they’ve done, where they come from, etc…” he says.

Secondly, he would recommend asking the potential advisor if they could provide a couple names of existing clients with similar account structures who could verify the information.

For existing investors, he recommends asking your investment advisor for a breakdown of the longest-term performance possible.

“I know people say ‘it’s not all about performance, but it kind of is,’ ” he says. But it can be hard to keep track on a yearly basis. “Every year people may take money out or put money in and (how the account is performing) gets skewed because they’re busy living their lives – so the big question is ‘can you show me how we’ve done?”