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Investment Advisor Awards May Mislead Clients

Investment Advisor Awards May Mislead Clients

August 25, 2023

When you attempt to evaluate the quality of an investment advisor, are you influenced by special awards they have achieved? If so, be careful, writes Peter Watson.

Some of these awards are not based on investment or financial planning proficiency. They are based on sales production or how much money an advisor manages.

The Ontario Security Commission has issued a warning to investment firms. Sales production awards are now considered a “compliance deficiency.”

In simple terms if you have achieved investment, financial planning, or other relevant accomplishments, that can be promoted. Generating a certain amount of revenue or sales can no longer be used for marketing purposes.

The OSC has requested firms and investment advisors remove references to awards or recognition of any marketing or client communications including on websites or LinkedIn profiles.

In my opinion this is an excellent move by the OSC. The world of investments and financial planning is complicated enough. Investors need simple clear and relevant information so they can make the best decision on who they should consider helping them manage their investments.

These new restrictions will not curtail an advisor’s ability to promote themselves. As an example, self-promotion can be done by communicating how many of their clients have a written financial plan or indicating what financial services are offered.

Promote the education and industry training of the advisor and team members. Indicate the number of years’ experience.

The OSC has indicated it will be strict on implementing these new guidelines: “Even where the stated ranking criteria is not based on sales activity, revenue generation, or assets under management, the actual results we have observed in certain cases would suggest otherwise.”

The days of self-promotion based on sales achievements are over. That is good for investors.

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com