Claims Against Financial Advisers

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Financial advisers are professionals who work with investment dealers, mutual fund dealers and life insurance agencies. They must comply with standards set down by regulators, by their trade associations, and by the law.

Basically, they have a duty to know their clients and to give advice that is suitable for them. Sometimes, they don’t live up to their duty. What should clients do then?

It all starts with professionalism.

It does not take much to become a financial adviser. It takes a great deal to become a good one. Sometimes it is difficult for clients to know the difference. Unfortunately, regulators do not require much in the way of education, training or experience before financial advisers are licensed to give advice to clients. Compare this to doctors, dentists, accountants, engineers, architects and lawyers, who must go through several years of education and then perform apprenticeships before they are licensed.

Financial advisers can be licensed to take on clients by completing minimal courses and training. In theory, the public is protected because such advisers are supervised by financial institutions. In practice, these institutions profit from the sales made by their advisers. Advisers profit from the same sales. This sets up a conflict of interest.  Advisers act in the best interests of their clients, but many deny they are responsible to act in your best interest when problems arise.

How to spot misconduct?

This can be quite difficult. If you are invested in the stock market, and the market goes down, whose fault is your loss? Indeed, the rules governing financial advisers require that they take reasonable steps to know the financial circumstances of their clients. Here are some red flags to spot misconduct:

  • Did your adviser spend most of the time of the first meeting extolling the benefits of some investment strategy? They should spend most of the time getting to know you.
  • Did your adviser fill out a form and ask you what you thought your investment knowledge was? Your investment objectives? Your risk tolerance? These are professional judgments. Your adviser should discuss these questions with you only after getting to know you and investigating in detail your financial history and further plans.
  • Did your adviser spend as much time telling you what could go wrong with an investment as what benefits were possible? Your adviser is responsible to warn you of both the risks and possible rewards of any recommendation or transaction, in language you could understand.
  • Did your adviser recommend that you buy shares of companies that you’ve never heard of before? Or invest in mutual funds that you did not understand? If you don’t understand them, it is quite possible that the adviser does not understand them either. Your adviser is also obliged to understand the products recommended.
  • Did your account lose money when everybody else earned a profit? Your adviser does not guarantee good results. Your adviser should guarantee the process by which you invested in the products that you have. If you lose when others profit, this might suggest a breakdown of this guarantee.
  • Did you pay surprise fees for your investments? Check your recent statements.

How to complain

There are two ways to complain: officially and legally. Official complaints are made to the regulators. Unfortunately, in most provinces regulators are powerless to order compensation. For some smaller claims, clients also have access to the Ombudsman for Banking Services and Investments, which attempts to negotiate settlements, but has no legal power.

The legal process is through a court action (lawsuit). Fortunately, the Canadian courts have looked favourably on claims that are brought because of misconduct by financial advisers. There are precedents. Clients can start a complaint by hiring a lawyer, preferably one who has experience in this area. The lawyer should gather up the information that the financial advisers have compiled, assess the claim and its likelihood of success, and then start the claim in provincial court. If your lawyer will take a case on a contingency fee basis, this means that you pay your legal bills if and only if you succeed in your claim.

If you have questions about a life insurance policy or a claim for benefits, call us for a no-obligation consultation. 1-888-288-2033, ext. 247, or visit





About us

We are the Financial Loss Advisory Group (FLAG), a practice group of MBC Law Professional Corporation, a litigation boutique firm. Led by Harold Geller, John Hollander and Margot Pomerleau, the FLAG consists of lawyers, with support staff. We investigate, we negotiate and we litigate. We only represent victims of financial loss, and never the institutions. We level the playing field. We are on your side.