Area of Law: Investments and Securities
Answer # 276
What is an Investment Advisor and how do you choose one?Region: Ontario Answer # 276
What is an Investment Advisor?
Investment Advisors (IAs), also sometimes referred to as financial advisors or investment brokers, are people who are trained to provide investment advice and buy and sell securities. Investment Advisors work for investment dealers that trade in securities.
Investment Advisors are required to meet proficiency requirements set out by securities regulators before they can become registered as an Investment Advisor with the Investment Industry Regulatory Organization of Canada or the relevant stock exchange. This includes successful completion of the Canadian Securities Course, and the Conduct and Practices Handbook Course offered by the Canadian Securities Institute (CSI), plus the 90-day Investment Advisor Training Course. Investment Advisors must also complete CSI’s Wealth Management Essentials Course within 30 months of approval for registration. In order to maintain their registration, an Investment Advisor must meet continuing education requirements throughout their career.
Investment Advisors can further their training and obtain other designations, such as Certified Financial Planner, or Mutual Fund Representative.
What does an Investment Advisor do?
An Investment Advisor can help you manage your investment portfolio. They provide investment advice and guidance to clients by accessing a client’s needs, and recommending the appropriate mix of investment options for that client, including bonds, mutual funds, and stocks. The recommendations made by the Advisor must be appropriate for the client. This is known in the securities industry as “suitability” or the “Know Your Client Rule.” It is important to discuss your investment objectives with your Advisor, so that he or she can invest your money in investments that you are comfortable with.
In order for your Investment Advisor to make proper recommendations for you, they will need to collect accurate information about your personal and financial circumstances, including:
- marital status
- income and net worth
- number of dependents
- risk tolerance
- investment objectives
- investment knowledge, and
You can set limits on the level of risk you are willing to accept and on the types of investments you are prepared to make. All investments come with some risk, but your Advisor can structure your portfolio so that it matches your comfort level and investment objectives.
Investment Advisors are usually paid by taking a commission when they buy or sell securities on your behalf. An Investment Advisor cannot buy or sell a security in your account without consulting you, unless you grant the firm permission in writing. Also, you must receive a confirmation of all trades made in your account as well as regular account statements.
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