Personal Investor: Wronged by your advisor? Here’s what you need to do

Personal Finance Columnist, Payback Time

Most Canadians save for retirement through mutual funds. Many don’t realize they pay a high price for advice.

Each year mutual fund companies give a portion of the money you have invested to the advisor who sold you the fund. The amount is typically one per cent, or $1,000 each year on every $100,000 invested. It is called a trailer fee and it is hidden within a bigger fee that the mutual fund company keeps – known as the management expense ratio (MER) – which is typically between two per cent and three per cent.

In some cases, investors must pay advisors an additional one-time percentage fee, called a “load,” when the fund is bought or sold.

In return, the advisor is expected to get to know your investment goals and risk tolerance, recommend the right combination of funds, and advise you as market or personal circumstances change.

Sometimes that doesn’t happen and investors can be left with funds they don’t understand or even want. In those cases an industry regulatory organization called the Mutual Fund Dealers Association has suggestions for filing a complaint:

1. Contact your mutual fund dealer: Member firms are responsible for monitoring the actions of their representatives to ensure that they are in compliance with the by-laws, rules and policies governing their activities. The member will investigate any complaint that you initiate and respond back to you with the results of their investigation in a timely manner, usually within three months of receipt of the complaint.

2. Contact the MFDA: You may call the complaints area at 416-361-6332 or toll-free at 1-888-466-6332 or write using the complaint form available on its website. You may contact them by e-mailing complaints@mfda.ca, or by fax at 416-361-9073 or regular mail.

3. Contact the Ombudsman for Banking Services: This is an organization independent of government, the financial services industry and the MFDA. It investigates unresolved complaints from individuals and small businesses about financial services firms.

4. Consider contacting a lawyer: A lawyer may be able to assist you with your complaint. Information regarding applicable limitation periods for commencing a civil action follows.

5. Be aware that regulations vary by province: Some have additional provisions in place.

The MFDA also has tips on filing a complaint:

Contact the MFDA. You can contact the MFDA at any time. You do not need a response from your dealer first.
Gather your facts. Think about the problem and the result that you want. Write down the main points in the order that they occurred. Note the name of the firm, the accounts and products involved, who you dealt with, key dates and the circumstances surrounding the issue. Put together a file of any supporting documents. Include copies of application forms, statements, transaction confirmations, cancelled cheques and all relevant correspondence to and from the firm. Never send the originals of any documents in case they get lost.
Put it in writing. If possible, it's best to make your complaint in writing. Make sure you include your complete address and a phone number or e-mail address where you can be reached.
Document your actions. Document all the steps you take to resolve your complaint. Put together a file of relevant documents like application forms, agreements and account statements. Keep copies of letters, faxes, e-mails and notes of conversations.
Act quickly. It's important to file your complaint right away and to respond quickly to any requests for more information. Delays could limit your options and legal rights later on.
Be clear. When making a complaint to an MFDA Member dealer, be clear about whom you are complaining about, what you are complaining about, and when things went wrong. It is also helpful to state the outcome you are seeking, such as an apology or getting your account corrected.

The MFDA Enforcement Department assesses complaints made against member mutual fund dealer companies and sales persons, conducts investigations, and imposes disciplinary penalties where there have been breaches of by-laws, rules or policies. The Enforcement Department reviews complaints to determine if there are sufficient grounds to warrant regulatory action.

However, if you have lost money as a result they will not order the member firm to compensate you. You will need a lawyer for that.

Dale Jackson is BNN's Personal Investor. Follow him on Twitter @DaleJacksonPI