Losing money on an investment does not necessarily mean it was unsuitable | General financial discussion | Discussion forum

I don't find any of this surprising, but there are lessons that perhaps people can learn from it.

Here are a few:
Be very careful when filling out those Know Your Client forms. They are more important than you may realize and can be used against you later.
Never let the "advisor" fill out the form for you. Always underestimate your knowledge since no solid criteria for such knowledge are on the form. Recognize that it's in the "advisor"'s best interests to flatter you and suggest that you know more than you do, because it gets him/her off the hook if the investments prove unsuitable. Play dumb. There is always someone out there who knows more than you, no matter how much you know, so never go above "medium"; everyone else should say "low".
Don't even think about getting into the markets unless you know enough to ask the important questions about why this investment is suitable and what its risk factors are, how it has been assessed, etc. Ask for documents. Take them home and READ THEM before you make a move.
Recognize that "suitable" is ill defined at best and can be used to justify a lot of things. Some people might think it's suitable for me to go for a swim on a nice hot day in July, so they decide it would be suitable and fun to throw me in, but they don't ask if I can swim.
Recognize that one person's medium risk is another person's low risk and yet another person's high risk. These categories don't mean much because they are too broad. You have to evaluate the recommendations YOURSELF.
Recognize that an advisor of this type knows the difference between a recommendation that is "suitable" and one that is "best" for you. This is absolutely critical. The advisers that are obligated to recommend what is "best" for you must work to a higher standard of care and you will pay for those services.
If you really don't know what you are doing, don't depend on someone who doesn't have a fiduciary duty to do what's best for you. "Suitable" doesn't cut it.

Unfortunately, I doubt this couple was much the wiser after this entire experience. I doubt they understood why they lost.
Note that in this precis there is no mention of whether this was really a GOOD investment or not, whether it had POTENTIAL to recover or not, or whether it was a complete DUD. All we are told basically is that it looked like a good idea at the time, good enough for people who were wiling to call themselves more risk tolerant than they really were.
Unfortunately, this happens a lot, and none of them are ever going to get any satisfaction from OBSI.

And ALWAYS ask if the salesthing is under fiduciary duty to you! Just the mention of the term often leads to further disclosures or a change in advice.
RetirEd.

savemoresaveoften gets it, some people try to make it look like it's others' fault when they lose money, simple as that. And these same people would not have raised any issue if their returns were egregiously high, even if the advisor had put them into riskier stocks to do so, they're only reacting because they lost. Predictably they just want their losses paid for by someone else, ho hum.

Plus (not surprisingly) they lied. They said they noticed the returns weren't there and decided to see if it recovered, then they said they were operating a business so were too busy to notice their losses at first (another lie: it's not true that running a business mean you don't have 5 minutes every month or so to check your statements, running a business is not a special category of busy-ness).

It was determined that their advisor had done the right thing, exactly as I'd expect the vast majority of advisors do.

Norman1 said

RetirEd said
And ALWAYS ask if the salesthing is under fiduciary duty to you! Just the mention of the term often leads to further disclosures or a change in advice.
RetirEd.

The answer will be no and you won't get access to someone who does have fiduciary duty without $500,000 to $1 million to invest.

It is simply not worthwhile for an investment counsellor or portfolio manager to work with someone who has $20,000 to invest. They and their firm will end up splitting a 1% to 2% management fee of just $200 to $400 a year.  

That's basically true, although there are a few independents who will take you on for 250K if they are building their practice and you look like a good prospect (youngish, disciplined saver, very well-paying reliable job or in-demand skills, rich dad, etc.)

What these minimums mean though is that you're basically on your own until you qualify. For most people, who are not willing to do all the homework or don't have time or the wits to do it, they should either (a) concentrate on saving more money and put it in GICs until they can afford better advice, or (b) use a robo-advisor until they hit the threshold or perhaps indefinitely if they don't want to pay).

It also means that when they hit 500K or whatever minimum is required, they should look for an adviser with fiduciary responsibility and be willing to pay for that service. If not, they should spend the intervening time LEARNING how to DIY successfully. It's a lot of work. Most people don't want to put in the time or can't, but they still expect results they can brag about.

The average naive person who is the most vulnerable doesn't know what questions to ask or where to find out.
But the word "fiduciary" should alert your prospective advisor that you expect responsibility from them. Get comfortable with pronouncing it before you meet up.