The investment advice industry gets a wake-up call as small investors push for greater protection.

CASE #1 A mutual fund dealer encourages his 40-something client to purchase an expensive product, not telling her that he'll earn a higher commission for selling it. While this fund doesn't perform any better than its cheaper competitors, over the course of time it costs the buyer thousands of dollars more in management fees.

CASE #2 An older couple is charmed by a persuasive advisor who convinces them to adopt a higher-risk strategy despite the fact it makes no sense for their age and stage in life. The markets dip, and they lose half their savings.

CASE #3 An 80-year-old woman gives her financial advisor blank cheques to invest her retirement savings. She soon discovers he's been funnelling her money directly into his own company. Humiliated and broke, she's forced to return to work so she can pay her bills.

In each of these real-life scenarios, the financial advisor has clearly failed to act in his client's best interest. He has pocketed their money, given them bad advice or steered them into risky schemes, causing huge financial loss for the investors at a time they can least afford it.

But in only one case did the advisor actually break any laws.

That would be #3, a clear-cut case of fraud. And while #1 (pushing a client into unsuitably high-cost investments) and #2 (exposing a client to inappropriate higher-risk investment strategies) may seem highly unethical, they aren't strictly illegal under the fuzzy regulations governing the investment industry.

So what does constitute illegal practice from your investment advisor? Well, it's complicated, and the lack of clarity governing the advice industry has become a huge bone of contention for small investors.

It should be noted that the vast majority of advisors, who go by a myriad of mysterious titles (see sidebar below), do act in their client's best interest. They're required to go through the Know Your Client form, in which they build a detailed account of their clients' financial situation, needs, goals and risk tolerance.

But many groups, including CARP, the Canadian Foundation for Advancement of Investor Rights (FAIR) and the Small Investor Protection Association (SIPA), say this isn't enough to protect small investors, especially seniors who are particularly vulnerable. "Unlike younger people, many older investors just don't have the time, the tools or the income to recover lost savings," says Wade Poziomka, CARP's director of policy and litigation.

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