The following post is courtesy Brian Kieran at www.betterthan50.com
by Brian Kieran
If a retirement investment looks too good to be legitimate, it probably isn’t. It’s as simple as that, but hundreds of Victoria area investors – mostly seniors who could ill afford to be wiped out – ignored this truism between 2007 and 2010 and lost millions in life savings and home equity.
However, one of Victoria’s better known and respected financial planners, Robin Muir, says investors should “know the red flags of investor fraud … if it sounds too good to be true it is probably bogus.”
The local news has been full of reports that the BC Securities Commission (BCSC) alleges that Cowichan Bay resident David Michaels acted as an investment adviser without being registered to do so and improperly advised more than 480 clients to buy $65 million worth of market-exempt securities.
Michaels used a weekly radio infomercial on CFAX to promote his investment business, telling potential investors he gave up his registration as a stockbroker because he had lost faith in the market and resigned when he foresaw the impending market crash.
The BCSC says this was a fraudulent claim because the former mutual fund salesman actually lost his licence in 2006 when he was under investigation by the Investment Dealers Association of Canada for “a number of off-book transactions with clients.”
BCSC spokesman Paul Bourque alleges Michaels pocketed $5.8 million in commissions for himself by talking seniors into buying the securities by taking out loans on their homes. “They had a relationship of trust with him when he was registered and he used that relationship of trust to keep selling these high-risk exempt market securities.”
The BCSC claims that “virtually all of the roughly $65 million invested by Michaels’s clients is now worthless, leaving many of them financially destitute while their home equity loans remain.”
Muir, the managing partner of Hatch & Muir LLP, has this caution for seniors: “Don’t believe claims that your investment advisor can get you higher returns or more consistent returns than what similar investments are earning. If the overall market is falling the chances of your portfolio rising is remote.”
If you go to Hatch & Muir’s website (http://www.hatchmuir.com/) and go to the “Resources” icon on the navigation bar you will find lots of good advice about hiring a certified financial planner.
Here are 10 great tips for choosing a financial planner:
- Know what you want. Determine your general financial goals and/or specific needs.
- Be prepared. Read the newspapers and finance publications to maximize your familiarity with financial planning strategies and terminology.
- Talk to others. Get referrals from advisors you trust, from business associates and friends. Alternatively, contact Financial Planning Standards Council (FPSC) for a referral to a financial planner in your area.
- Look for competence. A number of specialty designations exist in the financial planning and investment services professions. Choose a financial planning professional, such as a Certified Financial Planner (CFP) licensee who has met professional standards of financial planning competency and has agreed to abide by a code of ethics.
- Interview more than one planner. Ask them to describe their educational backgrounds, experience, and specialties, the size and duration of their practice, how often they communicate with clients, and whether an assistant handles client matters. Make sure you feel comfortable discussing your finances with the planner you select.
- Check the planner’s background. Depending on his background, call his professional association to check on his complaint record or call FPSC to see if he is a CFP licensee in good standing.
- Ask for references. Find out if the financial planner works with any other professionals such as accountants and lawyers. Request references from these individuals.
- Know what to expect. Ask for a registration or disclosure document detailing method of compensation, conflicts of interest, business affiliations and personal qualifications.
- Get it in writing. Request a written advisory contract or engagement letter to document the nature and scope of services the planner will provide. You should also understand how the planner will be compensated.
- Reassess the relationship regularly. Financial planning relationships are quite often long term. Review your relationship on a regular basis and make sure your planner understands your needs as they change and develop over time.