As business students, we know the importance of saving and investing our money. As any second year finance class will tell you, the earlier you invest, the better you’ll be down the line due to compounding gains. There’s a common saying in the investment world that states, “It’s not timing the market, it’s time in the market”. But what if you don’t know what investment strategy is right for you? Well, it’s important to be careful on who you should trust for reliable investment information. There’s an interesting phenomenon going on in the investment world that is going largely unnoticed in Canada, and that's the difference between a financial advisor and a financial adviser. At first glance, it may seem trivial, just the change in vowels. But the fact of the matter is it may have a serious impact on the future of your investments.
Under Canada’s current regulations, financial advisors, with an “o”, also known as dealing representatives, is an unregulated title and has no legal obligation to act on behalf of the clients best interests. In other words, financial advisors can, and often will, prioritize and favour high commision investment products that stand to give the financial institution the most gain. They are licensed salespersons. They are selling what the bank incentivizes them to sell in order to be competitive with regards to performance standards. There are currently 121,000 financial advisors in Canada.
Only 4,000 financial advisers exist in Canada. Financial advisers, with an “e”, have the legal obligation under the Ontario Securities Commission to act on behalf of the clients best interest. These are the people where you can legitimately trust to give you the most optimal investment advice.
This is a serious and hidden problem that currently exists within our financial regulatory system and should serve as a warning, especially to beginner investors looking to enter the space. Be sure to know the difference next time you walk into a bank seeking investment products. Financial advisors likely have daily sales targets they’re trying to meet and your money might help them achieve that goal. It’s important to seek professional, unbiased information before investing. Invest wisely.
4th Year Bachelor of Commerce Student
Director of Web Development at SBSS
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