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How trustworthy is your financial adviser?

Under such a circumstance, Smith adds, you should ask questions: Why are they suggesting the particular product? What's so special about it? Why purchase it now?

Hamza adds that "if there is a level of complexity and your adviser can't explain it to your satisfaction, or if they seem evasive or like they are skirting around your question, a red flag should go up."

Adviser response
Another sign that should worry investors is not being able to contact a financial adviser easily, or finding that the person has left the office with no explanation about his absence or who is taking over the portfolio.

Hamza says the industry standard is for a client to be contacted within 24 hours of leaving a message with her financial adviser. "If not, get on it," he says.

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In such cases, contact the adviser's office. Ask for details about the adviser's whereabouts: Where is he? How long will he be away? Who is handling things in his absence? If you discover the adviser has left the firm, ask why and who is in charge of your file.

Should the answers prove unsatisfactory, contact the adviser's superior. If you remain concerned, or in the absence of any response, you can get in touch with the appropriate licensing body and ask for an investigation.

"Scams are a very small part of the industry," Hamza says. "But that said, anything is possible -- especially these days when anyone can copy letterhead and such. There are people with the passion (and time) to manage their own portfolio, but the average person should rely on a professional. That's why we exist, to help consumers research, understand risk before they speak to an adviser and hold the industry accountable."

Be diligent
It's a good idea to recheck your adviser's credentials and licenses from time to time. Professional organizations generally list any members who are not in good standing and will receive complaints and conduct investigations if warranted.

Where the 17,000 Certified Financial Planners (CFPs) are concerned, the standards council conducted 16 ethics code investigations last year. Ten of these cases were closed, and one disciplinary action was undertaken.

For unresolved disputes, investors can turn to the Ombudsman for Banking Services and Investments (OBSI) to conduct an impartial review. The office will get involved only after a client has been through the investment firm's complaints process and can only recommend, not order, compensation. However, OBSI claims to have an "excellent record" of satisfactory resolution and publishes the names of firms who refuse to act upon its recommendations.

If criminal wrongdoing is suspected, investors can contact the Royal Canadian Mounted Police or the Canadian Anti-Fraud Call Centre.

Diana McLaren is a writer living in Toronto.

-- Posted: Aug. 26, 2009
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