Getting Advice on Investments
In general, you have three options when it comes to how you manage your investments. You can use a registered investment advisor, a robo-advisor, or look after your own investments through self-directed investing
Working with a Registered Investment Advisor
Fact: Women tend to seek information and advice from financial advisors (44%) and banks/credit unions (39%).
Registered investment professionals have a wealth of knowledge, experience, and guidance that can make a substantial difference in achieving long-term financial goals.
A registered investment advisor will play an important role in helping you select suitable investments and managing your portfolio. They have an obligation to know your financial situation and outline the risks involved with investment recommendations. An investment advisor that sells securities, such as stocks, bonds, mutual funds, or exchange-traded funds (ETFs) must be registered with a provincial securities regulator – like the BCSC.
Always do a background check on anyone who claims they’re registered to sell investments so that you can protect yourself from a potential investment fraud.
Your Advisor’s Role: There are a number of things you can expect when working with a registered investment advisor. They should:
- Make clear and specific recommendations, and explain how their recommendations will help you meet your financial goals. This should include explaining the risks involved with every investment they recommend.
- Answer your questions about investment products and strategies. Remember, if you don’t understand something, ask for clarification until you feel comfortable moving forward with an investment.
- Get your permission before buying or selling investments on your behalf, and confirm it in writing – unless you have a discretionary account or you’ve given someone else trading authority or power of attorney over your account.
- Provide information about the fees you pay and the performance of your investments.
- Keep your personal information safe, send you regular account statements, and meet with you at least once a year to review your information, progress, and update your plan, if appropriate.
Canadian securities regulators, such as the BCSC, also play a role in how the client-advisor relationship is conducted. Regulators recently made rule amendments based on the concept that clients’ interests come first. In a nutshell, your investment service provider and its registered advisors are required to put your interests first when recommending or choosing investments for you. If there’s a material conflict of interest, they must address it in your best interest. They will also need to do more to clarify what you can expect from them in terms of investment products and services.
Learn about working with a registered investment advisor in detail:
Your Role is Important: As the client, you also have responsibilities when it comes to your working relationship with your investment advisor. Open and honest communication is the foundation of a successful relationship. Be clear about your financial goals, risk tolerance, and any specific concerns you may have. Schedule regular meetings with your advisor to review your portfolio’s performance, and discuss any life changes and reassess your goals.
By taking an active role in your relationship with your advisor, you can maximize the benefits of professional guidance while maintaining control and awareness of your financial future.
Watch this video to learn more about your role when working with an advisor.
Fees in Focus: Your investment advisor’s firm is compensated through fees and charges. What you pay will reduce your ability to earn future returns, so you need to know what the fees and other charges are, what you’ll get for them, and how you will pay.
Learn about investing fees in detail:
- Read – Advisor Compensation
- Read – Investment Fees & Charges
- Watch – Understanding Fees
- Tool – Investment Fee Calculator
Working with a Robo-advisor or Working on Your Own
If using a registered investment advisor isn’t right for you, there are other options available to help manage your money. You can use a robo-advisor or look after your own investments through self-directed investing.
Robo-advisors, also known as online investment advisors, use technology to lower costs and create processes, such as opening an account, that require minimal or no direct human contact.
You’ll likely be offered standardized model portfolios containing lower-cost investments, such as ETFs. Because of their lower operating costs, robo-advisors can charge lower fees.
Self-directed, or do-it-yourself (DIY) investing, is where individual investors build and manage their own investment portfolios. Self-directed investors decide which investments they want to buy and sell, and when. Typically, they use discount brokers and online trading platforms to make their trades. As a result, they pay lower commissions and fees because they don’t get advice about the investments they choose to make for themselves.
You might consider self-directed investing if you want to be more hands on with your investments and develop your own plan. It’s important to understand your investment goals, time horizon, risk tolerance, and investment knowledge before taking the DIY route.