Investments are exceedingly common for people of all different ages, financial positions, and reasons for investing. Some people want to save for retirement. Some people are putting aside money for university or for expectations of buying a home or a car in the future. Some start investing in their early twenties at the start of their careers and some begin investing at age forty. Many people consult financial advisors or banks before beginning their investments. Others hire an independent asset management firm to have an active hand in the investment process. Regardless of choice, most investors rely on the advice and knowledge of professionals to aid in their investment decisions.

While many investment advisors are honest and genuinely want to assist their clients, this is not always the case. Every year, millions are squandered in false or misguided investments and over the last several decades, many of these scandals have made their way into the mainstream media. It is natural that a new investor may be worried about being mis-sold a investment, but there are clear signs to look for and defining factors to consider when reading over an investment proposal.

Investment Decisions

When considering the sorts of investments that are right for you, keep in mind your risk tolerance, your age, your tax situation, and your investment goals. If you are saving for university for your child, you may have fewer years to let an investment grow than if you are a young adult saving for retirement. Communicate these aspects clearly to your financial advisor so that he or she knows what sorts of investments you are looking for and can accurately choose options based on your long-term goals. When your advisor presents options to you, ask questions. Make sure that the investments being presented to you are appropriate. Keep in mind that just because an investment becomes worthless or does not yield the expected results you were not necessarily mis-sold. However, if you expressed interest in a portfolio with an asset allocation that has a high ratio of fixed income to equity and are pressured into investing in brand new high risk private equity funds, there may be something amiss.

Unfortunately, this sort of behaviour of mis-selling is unsettlingly common. It is not unusual for unscrupulous individuals to tempt low-risk customers with high yield funds. If an investment sounds too good to be true, it probably is. Do not be afraid to speak up and ask questions if you do not believe the investment an adviser is recommending fits your specific needs. If you have specified that you have a low risk tolerance due to age, income levels or for any other reason, your advisor should not be showing you high-risk equity investments. If you are worried about a substantial tax liability, your advisor should not urge you into low cost trading that could trigger large amounts of taxable capital gains. If an advisor tries to pressure you, he may be trying to persuade you to buy into an investment that is not right.

If you have been mis-sold an investment, there are options available. If you were directly misled by a bank or advisory firm, contact a solicitor. Investment advisory is a regulated process and if someone is intentionally misleading clients for personal gain, there can be legal ramifications. If you are willing to pursue a legal defence, you may be able to get your lost investment back.

The best way to avoid being mis-sold is to stay alert and knowledgeable. Do market research to get an idea of the options you have and whether an advisor’s suggestions are reasonable. Choose a firm or bank with good reviews and do not be afraid to take suggestions from friends who have experience with investing, banks, or management firms. If an investment does not feel right to you, do not invest. Go with your instincts and do not take another’s word if you are unsure. Being mis-sold a investment can be financially devastating to an individual or family. If you suspect it has happened to you, there are ways of getting help. Practice due diligence with all investment opportunities and with the proper preparation and knowledge of what to expect, your sound financial decisions will carry you comfortably into the future.

Information and redress about Mis sold investments is available from Maple Leaf Financial


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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.