Investing is everyone's responsibility... but who exactly is "everyone"?

Sébastien: Hello and welcome to the “In Your Interest!” podcast. My name is Sébastien Mc Mahon and since our good friend Ashleay can’t be here today, I’ll be hosting this week’s episode on my own. Joining us today is Frédéric Laverdière-Pagé, Vice President, Sales and Business Development at Investia. Hello, Frédéric.

Frédéric: Hi, Sébastien.

Sébastien: Nice to have you here to discuss another very important topic: the roles and responsibilities of everyone involved in an investment transaction, basically. So, first of all, when we say, “Your investments are everyone’s responsibility,” what do we mean by “everyone”?

Frédéric: When it comes to financial security and investing, the following, let’s say, players are involved. Whether you’re dealing with a bank, credit union, insurance company, full-service brokerage firm or even mutual fund dealer, there’s always stakeholders involved—beyond the investors, themselves. (As opposed to individual investors, i.e., when you manage your own investments, in which case there’s often only two parties involved: the individual investor and a transaction platform.) If I’m talking more specifically about Investia, we’re in more of a three-way relationship: Investia (which acts as a mutual fund dealer), the mutual fund representative (which is registered with Investia) and the investor. If we look at Investia and the mutual fund representative, those two parties are governed by strict regulations and regulatory frameworks. Responsibilities are with the regulator and their commitment or value proposition to their clients. So, expectations are generally well known.

Sébastien: So, we know what to expect from those two parties, what are the big things that clients should expect from them?

Frédéric: In terms of a client’s expectations of the firm, the mutual fund dealer obviously needs to make sure that all the registered representatives are knowledgeable and licensed to actually offer the products they’re recommending to their clients, and also to ensure compliance, i.e., making sure that the investment is made according to the client’s investor profile and risk tolerance. So, this is why the “know-the-client” part is really important, in terms of the dealers’ and representatives’ responsibilities.

Sébastien: And do some responsibilities fall on the shoulders of the investor themself?

Frédéric: Yes. The first thing that comes to mind is financial understanding, financial literacy and education. The investor has to make an effort to acquire at least a basic financial education. This means understanding the products they’re investing in, the risks associated and their long-term objectives. I would draw a parallel with my former career (I’m a lawyer by trade). There’s a principle in law that says you have to know the law. We don’t necessarily expect them to be legal experts. Even lawyers don’t know the thousands and thousands of laws that exist. But the same principle applies to investments. So, the expectations for investors are: At least know a minimum so you can understand the basics, ask better questions and assess your risk tolerance with that knowledge.”

Sébastien: Yeah. So basically, you’re supposed to open the statements that you get, to at least follow what’s going on. If there’s something that’s not aligned with your expectations, you’re supposed to catch it and address it with your advisor. So that would be one…

Frédéric: Yeah. And you shouldn’t be opening your statements for the first time when meeting with your advisor, but when the information is initially shared with you; open and read them immediately, because there might be inaccurate information or there might be some situation, let’s say, a life event that makes a material change to your investor profile or even to your financial situation, and which may require changes to your portfolio, such as your monthly contributions. For example, if someone’s facing job loss, they may want to reconsider their current monthly contributions, since they may have less income in the near future.

Sébastien: Yeah. Off-air we’ve discussed cases where a client goes to their advisor, having not opened any statements over the last two years and when we finally open them, they find that something’s not to their liking. What happens then?

Frédéric: I don’t mean to get into the liability side of things, but in case it’s not accurate or if there’s a change… When we’re talking about a long-term plan, that’s the ultimate goal or North Star. But in between, before you get there, it’s not a calm river.

Sébastien: Yeah.

Frédéric: So, there might be some obstacles, there might be times when you change direction. But if you consistently review your documents, you can, again, confirm that you’re getting exactly what you wanted and make sure it’s still what you want. If you have any questions about what’s happening, with the statements or other information, this is where you need to raise them or at least to be aware about what’s going on.

Sébastien: Yeah, and you need to ask your advisor questions to make sure you’re well understood. We’ve discussed risk profiles many times in past episodes of the podcast: how important it is, the need to be honest, clear about what you want and what you don’t want, the risk tolerance that you have, if there’s a material change (such as a life event that makes you more or less tolerant to risk) or even a simple change in attitude. Let’s say you first say “I can tolerate some risk,” but then there’s a recession and you start to lose sleep and realize, “Well, maybe my current profile doesn’t match the one I had before.” It’s your responsibility to tell your advisor, at the very least. You need to keep your information up to date. You need to understand that your advisor is there to represent you, to make your dreams come true. So, any change in your situation and goals needs to be communicated as quickly as possible and as clearly as possible.

Frédéric: And in terms of sharing and communicating information, there are some situations that we’ve seen of people sharing information with their advisor using unsecured channels, such as using a regular Gmail to actually submit a notice of assessment or even transfer options of a pension plan (going back to the subject of job loss). Always remember that it’s important to communicate personal information in a secure way. As an example, at Investia, a client can share documents securely via the client portal and the representative or advisor, can also share sensitive information using that same channel.

Sébastien: Okay, so to summarize the information here, as an investor, your responsibility is to make sure your advisor has everything they need to help you and to ensure that you’re on top of the communications you receive. Basically, you need to invest yourself in this relationship.

Frédéric: Exactly. Because investing money is one thing but being invested in the process is another thing.

Sébastien: I think that’s a great way to conclude today’s episode. Thank you very much, Fred.

Frédéric: Thank you, Sébastien.

Sébastien: Thanks also to our listeners. Don’t hesitate to drop us a line if you have any questions and we’ll see you next week.