Understanding Fiduciary Duty: How It Benefits Canadian Investors

Most investors know that any kind of financial investment they make comes with a certain level of risk. But many Canadians, and especially new investors, may not be aware of the risks they face when they hire a financial professional who is not under fiduciary duty. 

When you hire someone from a financial institution or firm to look after your investments, you may assume they have your best interests in mind. 

But in Canada, the sad reality is this isn’t guaranteed or legally required, unless you hire a fiduciary financial advisor or investment manager.

What is Fiduciary Duty?

Fiduciary duty is a legal and ethical requirement for fiduciary advisors in Canada to prioritize their clients’ best interests above their own or that of their institution’s. Surprisingly to many investors, this is not a legal requirement for all financial advisors or financial planners in Canada

In the financial services industry, fiduciary financial advisors or investment managers are held to a higher standard of accountability and are expected to take care of your money and put your best interests ahead of their own. 

Benefits of Working with a Fiduciary Financial Advisor

When it comes to financial planning and wealth management, working with a trusted investment professional under fiduciary duty is crucial for your long-term financial goals.

Without a trusted fiduciary advisor, you may miss out on the best investments for your goals. The investment products chosen for your portfolio might benefit your advisor through compensation or incentives, rather than serving your best interests. In the context of investment management in Canada, ensuring your advisor is a fiduciary protects your interests and promotes better alignment with your financial objectives and dreams. 

Unlike brokers who follow a suitability standard — merely ensuring recommendations are suitable — fiduciary financial advisors in Canada must ensure the recommendations they provide are the best for the individual client. 

Beyond this higher level of responsibility, fiduciary investment management companies in Canada can offer their clients these added benefits:

Transparency and Trust: Fiduciary advisors must fully disclose all fees and potential conflicts of interest, fostering a relationship built on trust.

Personalized Advice: Fiduciary advisors tailor their financial planning and investment advice to each client’s individual needs, concerns, and goals, making recommendations based on their unique risk tolerance and time horizon.

Minimizing Conflicts of Interest: Fiduciary duty helps to minimize conflicts of interest, ensuring advisors make decisions solely based on what’s best for the client, eliminating concerns of self-interested commissions or aggressive sales targets common among other financial advisors.

Fiduciary Duty and Investment Management in Canada

When it comes to investment management services in Canada, it’s first important for investors to understand the difference between advising representatives and dealing representatives

Advising representatives, such as investment managers with a fiduciary duty, are licensed professionals who can provide guidance on investment securities and products and are held to fiduciary-like standards.   

Dealing representatives, on the other hand, usually manage transactions on behalf of clients, offer little investment guidance and often work for brokerage firms with commissions and sales targets. Most importantly, these dealers are not held to the same fiduciary responsibility and ethical standard as advising representatives.

Benefits of Fiduciary Investment Managers 

When deciding what kind of investment management service you want to hire, it’s important to know the distinction between advising and dealing representatives and do your research on investment companies in Canada that offer guidance from fiduciary advisors and investment managers who will empower you to make financial investments that best work for you. 

Investors should consider the added perks of working with a fiduciary advising representative like an investment manager, including:

Comprehensive Approach: Fiduciary investment management companies in Canada take a more comprehensive approach to investment management services, including portfolio management, retirement planning, tax strategies and estate or succession planning. Rather than just focusing on your securities and investment products, these advisors look at your total financial picture and wealth management.

Integrated with Holistic Financial Planning: Investment management is seamlessly integrated into the overall financial planning process, ensuring all aspects of the client’s financial life are considered.

Long-term Financial Well-Being: Non-fiduciary advisors might focus on selling financial products, whereas fiduciary financial advisors prioritize long-term financial well-being for their clients.

How to Find a Fiduciary Financial Advisor in Canada

It can be hard to know if an investment management company or financial advisor is right for you. But starting with an investment professional or team of professionals who are fiduciaries is a good start.

When searching for a fiduciary advisor in Canada, it’s essential to identify professionals with specific credentials such as CFP (Certified Financial Planner) or CIM (Chartered Investment Manager), which signify a commitment to fiduciary principles. Be sure to ask your potential advisors about their fiduciary status, how they are compensated, and how they manage conflicts of interest. 

At Avenue Investment Management, we pride ourselves on always putting our clients first and adhering to the highest of fiduciary standards. Being a legal fiduciary, our investment team is held to a higher standard of accountability and we deliver on this promise by cutting our management fees in half for our equity portfolios during down markets.

Contact us today to learn more about how we can help you achieve your financial goals.

1000 667 Avenue Investment Management