One of the responsibilities investors face is managing the risk of their portfolio. This week’s article is going to use a recent news release by a regulatory body that might help investors anticipate different types of risk.
The risk I am referring to has to do with the governance of your investment portfolio.
What concerns should investors be aware of in order to safeguard their portfolio?
The Investment Industry Regulatory Organization of Canada (IIROC) recently issued a news release to outline investor complaints. But first, who is IIROC?
IIROC is the national self-regulatory organization that oversees all investment dealers and their trading activity in Canada’s debt and equity markets. It protects investors and strengthens market integrity.
IIROC sets and enforces rules regarding business and financial conduct of dealer firms and their registered employees.
In summary, they police the investment business.
In a recent news release, IIROC disclosed investor complaints it had received. The number-one investor complaint had to do with unsuitable investments.
Over the past two years IIROC received 838 complaints from clients of IIROC regulated firms. Unsuitable investments top the list with 222 complaints.
Other complaints included service issues, disputed fees, firm policies and procedures, and unauthorized trading. These five complaints accounted for almost half of all complaints received.
An unsuitable investment simply means that based on a person’s financial objectives and risk tolerance, a particular investment does not belong in their portfolio.
The goal of investing is to own specific securities that are deemed most appropriate based on what you are trying to achieve. It is important to have the correct investments in your portfolio.
To do that you need to determine whether all investments owned, deserve to be owned.
Regrettably, the majority of suitability complaint cases involve elderly and/or vulnerable clients. Seniors are the largest group that contact IIROC with complaints.
My recommendation is for investors to review all investments owned with the goal of answering these questions. Is each investment appropriate? And, should each investment continue to be owned?
The goal of this review isn’t to uncover wrongdoing. It is a matter of continuing to monitor your portfolio to determine if any changes should be made.
People invest in order to accomplish some of their most important financial objectives, such as assisting children with the cost of a post-secondary education, and preparing for retirement.
Many individuals seek professional advice.
Receiving professional advice does not eliminate the need for investors to take a close look to see if what they are doing makes financial sense.
Your advisor can help, but it is important for you to understand that managing your own personal investment portfolio is an important task.
Anticipate future risks and then be proactive to ensure those risks do not negatively impact your financial security.