How prospects are finding you

By Paul McLaughlin | August 10, 2012 | Last updated on August 10, 2012
4 min read

The case of Bevan Jones—fleeced by his own brother, Earl Jones—remains one of the most disturbing in Canadian financial history.

Read: RBC offers $17 million to Earl Jones victims

It seems greed knows no bounds, so investors need to protect themselves from wolves in sheep’s clothing.

In essence, it all comes down to due diligence and finding a good advisor, and many prospects follow helpful hints and tips when starting their search.

Below are six steps smart prospects follow; the question is: when they follow these steps, how is your firm faring?

To ensure you don’t end up on their red lists, make sure your firm is prepared to answer any questions they throw at you. Also, if you’re regulated and have credible advisors, be sure to let customers know up front using your website and marketing material.

Tips on finding a reputable firm:

  • Google everything. “Check out the firms you’re doing business with and the individuals who are handling your investments,” says Bruce Leboff, who is a Chartered Accountant, a Chartered Financial Analyst (CFA) and a registered portfolio manager. Google the firm and its advisors to find out if their registered professionals and if they belong to professional organizations. All of this information is public. Read: Turn online reviews into referrals
  • Ask. Ask. Ask. “People have to do their research, which includes asking a lot of questions,” says Chad Van Norman, a CFA and partner in the Calgary office of Jarislowsky Fraser Limited, an investment counseling firm that manages over $44 billion for pension funds and individuals with high net worth. “Generally, when I’m talking to new or perspective clients, I find they don’t spend enough time really interviewing me in the way they would, say, a new employee. They should take their time when making this kind of decision…a number of weeks or months before they make up their minds.” Read: Client questions are a good thing

    “I’ve known a lot of people in my life who’ve made a lot of money through their investments, says Tedd Avey, a member of Deloitte & Touche Canada’s Forensic and Dispute Global Executive Committee. “They put a lot of time into studying their portfolios, the markets, the economy. It’s like a job to them and they do it every day. If you work hard and have common sense about what you get involved with, you should be able to protect your investments. If you don’t, that’s when you might get yourself in trouble.”

  • Check the ethics. Ask your advisor if he’s signed on to a code of ethics from any professional body. Stephen Horan, head of professional education content and private wealth at CFA Institute in Virginia, also recommends asking if the advisor’s firm subscribes to an organizational code of conduct. “The advisor should be able to speak comfortably about both these things and want to discuss them,” he says “If they don’t, that’s not a good sign.” Read: In pursuit of designations
  • Referrals are not always good. Don’t rely solely on word-of-mouth referral for a prospective financial advisor, says Craig Hannaford, former head of the RCMP’s commercial crime section and now a security consultant. Although such a reference can be helpful, it ultimately provides little valuable information. Just look at where word of mouth led investors who believed in Earl Jones. “You can’t really rely on references,” Hannaford says, “especially if it’s for an individual who is not part of a large, established institution.” Read: 5 ways to get referrals
  • You need a watchdog. Consider that investing with individuals or small private firms could pose additional risk because you’re hiring someone who is not subject to any oversight. “Really, there’s no recourse if something goes wrong,” says Hannaford. If you invest with a broker or a financial institution, however, you can go to the institution, or IIROC (the Investment Industry Regulatory Organization of Canada) or the Ombudsman for Banking Services and Investments for help. There’s also the Canadian Investor Protection Fund, which provides up to $1 million insurance for an investor who has lost money in a transaction involving a CIPF member. Read: Keeping regulators happy
  • Know the source. “If you’re dealing with a brokerage firm always make sure you get statements from the firm and not an individual broker,” says forensic accountant Ken Froese, senior managing director of Froese Forensic Partners Ltd. “And never sign any document you don’t understand.” Read: 6 ways to close a prospect
Paul McLaughlin is a Toronto freelance writer.

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Paul McLaughlin