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There’s a bigger problem in the investment advisory business now than your portfolio’s poor returns last year.

The extraordinary twin declines in the stock and bond markets last year hit portfolios hard, and investors are unhappy about it. Analytics firm JD Power reports in its 2023 Canadian Full Service Investor Satisfaction Survey that the satisfaction level fell 17 points from last year to 652 on a 1,000-point scale.

It’s only natural to question your advisor when your investment returns disappoint, and there’s no doubt that a skilled investment advisor could have cushioned the worst of last year’s downturn. But we need to focus on the larger issue of the consulting business highlighted by JD Power.

The firm’s investor satisfaction survey is based on responses from 4,803 investors who work with a full-service advisor. Only 6 percent of these investors received comprehensive advice and services from their advisor. Comprehensive advice is defined as personalized guidance that covers all financial investment needs, understanding the client’s lifestyle and goals, putting the client’s best interests first, providing a financial plan and making sure clients understand the fees they are paying. The net result of this relationship should be that the counselor is a key part of the client’s life.

That’s a lot for a consultant to do. And let’s be realistic about the typical advisor’s workload. Smaller accounts will not receive the JD Power version of comprehensive advice in most cases. But many advisors seem to be primarily investing, which puts them directly in the crosshairs of their clients during bad years for the markets.

Only 57 percent of full-service clients said they had a financial plan from their advisor, and 38 percent of investors who actually have a plan don’t think their advisor understands their goals and needs. The most alarming finding is that 43 percent do not agree that their advisor’s recommendations are in their best interest.

When evaluating last year’s earnings from your account with an advisor, ask these questions

  • Are short-term bonds or bond funds recommended to limit losses in the bond market?
  • Are Guaranteed Investment Certificates Mentioned as an Alternative to Bonds?
  • If you have cash on hand, is it earning a competitive rate of return?
  • Are your stocks well diversified and not focused on speculation about the best performing sectors?
  • How do your returns differ from the benchmark stock and bond indices applicable to your holdings?

Next, on to the more important question of whether you’re getting comprehensive advice. If you are, you almost certainly know the story behind why your portfolio performed the way it did during the tough times of last year.

JD Power ranked 15 investment companies based on customer satisfaction. The top company is Edward Jones with 699 points, followed by Raymond James and National Bank Financial at 697 and 677.

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