Part 1: The Two Mandatory Questions Every Investor Should Ask Themselves


I have to make the assumption that anyone who invests, from conservative to aggressive, would want the best results possible from their investments. This seems logical, but confusion abounds when it comes to investing and how to have confidence in what we are being told.  In order to figure out how to get the best results there are two key questions every investor must ask:

1.    Who is the right advisory team to work with?    

2.    Can they deliver exceptional results? 

This is the first piece of a 2-part blog. I’ll address the first question below. 

Finding the right person or institution is the first step, but before we look at the scope of options, check out this Saturday Night Live spoof on investing. It's an older video, but it definitely worth your time.  You won’t learn the answer to the question, but the SNL skit should be a humorous reminder to look for areas of conflict of interest when it comes to investing, which is definitely a part of the solution to the first and second questions being addressed.  

I’m dragging Confucius into this discussion because he is an objective third party. And he may be able to stimulate motivation where needed. 


Who to deal with?

Answering this question can be daunting. The options are confusing and endless. You have advisors who are licensed and are regulated by industry or provincial regulators. These would include: insurance agents, mutual fund agents, investment brokers and investment counselors.  All the above may work for a bank or non-bank firm, an insurance company or be independent.  Different licensing allows for different investments to be sold.  Advisors can have multiple licenses, so it gets all the more confusing.  Because all of these folks are licensed though a regulator or multiple regulators, when you give any of these advisors your money, the primary risk you have is bad investment choices. (Note: never make a cheque or payment to anyone other than the firm they represent.) There are others who are not regulated. You then take on the extra risk of the quality of the individual(s) as there is no third party (trust company) between that person and your money.  The bottom line is that all of the above have the potential to deliver outstanding returns, or not. 

To find the right person in my opinion begins with finding the person who can offer the greatest number of options. Logic should tell you that the organizations that have the most options, have the best opportunity to achieve good results.  The following list of investments gives a reasonable sampling of the minimum options that you should be able to access: GIC’s, stocks, bonds, ETFs, mutual funds, segregated funds, annuities, separately managed accounts and real estate. You should also be able to have Canadian or US dollar accounts for your registered accounts like RRSPs and TFSAs along with your cash or margin accounts.  The greater your options, the greater your opportunities. Conversely, if the only investments offered are the company’s in-house products, your universe will be very small.

If you are shopping for new clothes, and you limit yourself to one brand or label, you may never find what you are looking for I.e. the designer may not make casual jackets, but only formal jackets.

A key to answering the first question is confirming if the companies you would consider have any restrictions on purchasing various types of investments and have Canadian and US dollar accounts (see list above as a general guide to investment options). This is not to say companies that offer very few choices don’t have some great options, but it is very unlikely they offer all of the best options.  Always remember you do have choices. Exercise them and refer to Confucius’ quote if you haven’t yet done your preparation. Hold off until next week’s blog when I’ll discuss the second question to ask once you have your list of advisors you’d like to call. 

Happy investing.