1. Working With Financial Professionals
Investing 101 – Part 2
Working With Financial Professionals

2. Who am I and why am I here? NBSC Marissa Crown corporation
Protect investors and foster capital markets
Marissa
BBA (E-com)
6 years with the NBSC
I’ve made $$ mistakes too

3. Financial Advisers - Expectations
What DON’T they do?
Predict market performance with certainty
Recommend investments that are always profitable
Act on vague instructions
Meet unrealistic goals
What DO they do?
Make clear and specific recommendations
Explain the reasons for the recommendations 
Point out the strengths and weaknesses of opportunities and recommendations 
Outline the risks involved
The term ’financial adviser’ includes: securities dealers; advisers; dealing representatives; advising representatives; or other registrants.

4. Financial Advisers – How to choose?
Decide what kind of help you need
How much advice do I need?
How experienced am I?
How much am I planning to invest?
Ask yourself: How much advice do I need?  Do you need basic investment advice, or do you need help with other financial matters like taxes and estate planning?
How experienced and confident am I? A more experienced investor may want an adviser who offers a wide range of products.  Someone newer to investing may be more comfortable with fewer choices and more guidance from their adviser.
How much am I planning to invest? Someone with less than $10,000 to invest will have simpler needs than someone who has a much higher amount to invest.  Also, some advisers require a minimum investment.

5. Financial Advisers – How to choose
Ask around
Make a short list
Check registration
One size does not fit all!
Now that you’ve got an idea of what you need, make a short list of potential advisers to meet with.
Ask your friends, family, co-workers and other professionals you trust for referrals. 
Use our Check Registration tool to make sure the adviser you are considering is registered with the New Brunswick Securities Commission. 
Referrals are just a starting point.  One size does not fit all - that’s why step 3 is so important.

6. Financial Advisers – How to choose
Set up a meeting
Screen over the phone
Meet in person
Ask questions.
Set up a meeting at their office to get a feel for how they run their business and how comfortable you’d be working with them.   To help you make your decision, ask them questions like: What is your education and professional experience?
How long has your firm been in business?
How long have you been with the firm?
What products and services do you offer?
How will you help me reach my goals?
How are you paid for your services (salary, commission or flat fee)? Ask how the adviser is being paid, what fees you have to pay to buy, hold and sell the investment, and how this affects your returns.  It’s important to understand how much the investment has to increase in value in order for you to break even or make money after all the fees are paid and what happens if it decreases in value.
Are you and your firm registered with the New Brunswick Securities Commission?
The adviser should also have questions for you about your financial goals and what kind of services you’re looking for.  This helps determine if he or she can provide the kind of service and products you need.

7. What to ask? Are you and your firm registered with the NBSC?
Registration tells you:
The type of products or services they are qualified to sell or provide advice on.
That they are properly qualified and meet a certain standard.
Are you and your firm registered with the New Brunswick Securities Commission?
In order to sell or advise in securities in the province of New Brunswick an individual or firm must be registered with the New Brunswick Securities Commission, unless an exemption applies. A person’s registration is more important than their title because it tells you the type of products or services they are qualified to sell or provide advice on. Registration helps protect investors because the New Brunswick Securities Commission will only register firms and individuals if they are properly qualified and meet a certain standard. You can look this up on the New Brunswick Securities Commission website at or by calling

8. What to ask? What products and services do you offer?
Specialized
Wide range
What level of services can I expect?
How often will we meet?
How will you update me?
What types of products and services do you offer?
Not all advisers offer the same products and services or have the same expertise. Some specialize in certain kinds of investments. Others can offer you a wide range of investments and services. If you’re an experienced investor, you may want an adviser who offers a wide range of products and lets you choose. If you’re newer to investing, you may be more comfortable with fewer choices and more guidance from an adviser.

9. What to ask? How are you paid for your services?
Salary (built into the products you buy)
Commission (on products they sell)
Flat fee (hourly rate or % of assets)
Combination
How are you paid for your services (salary, commission or flat fee)?
Financial advisers can be paid by salary, commission, a flat fee, or a combination of these methods. If an adviser is paid by salary, the cost of their advice is built into the products you buy. Many advisers are paid a commission for every product they sell. Other advisers charge a flat fee based on an hourly rate or a percentage of the assets in your account.
Find out how the adviser is paid, how much their services will cost you and what services you’ll get for your money.

10. Mutual Fund Fees Fees reduce your return
Sales Charges
Transaction fees
Account fees
Fund expenses
A fund’s fees are described in the Fund Facts or Simplified prospectus disclosure documents
Mutual fund fees
Fees reduce the return you get on your investment in a mutual fund. You may pay varying sales charges, other transaction fees and account fees depending on which funds you buy, how you buy them and what accounts you hold them in. You don’t pay fund expenses directly, but they affect you because they reduce the fund’s returns.
You can find information about fees in a mutual fund’s Fund Facts document and in its simplified prospectus. By law, a mutual fund company must prepare and file these disclosure documents with the securities regulator

11. Top 3 Costs - Loads
1. Sales Charges (“Loads”)– charged when you buy or sell units or shares of a fund.
Front-end Load / Initial sales charge
Back-end Load / Deferred sales charge
Low load / Low sales charge
No load
Fee-for-services
The five most common mutual fund commission structures in Canada are Front-End Load (FEL), Deferred Sales Charge (DSC), Low Sales Charge (LSC or LL for Low Load), No Load (NL) and Fee-for-service (F Class funds).
You may pay a sales charge when you buy or sell units or shares of a fund. These sales charges are also known as loads. Funds may be offered with a front-end load, back-end load, low load or no load. If you have a fee-based account, you don’t pay a sales charge when you buy and sell funds. Instead, you pay a single client advisory fee (usually 1%) every year to your adviser.
Front-end load or initial sales charge (ISC) – Some mutual funds charge a fee when you buy your units or shares. This is a percentage (up to 5%) of the amount that you are investing in the fund. The fee is paid to the investment firm that sells you the fund. You can negotiate this fee with your adviser.
Back-end load or deferred sales charge (DSC) – Some funds charge a fee of up to 6% when you sell your units or shares. Here’s how it works:
The longer you hold a fund with a DSC, the less you'll be charged when you sell it. The fee declines every year according to a fixed schedule.
If you hold it long enough (usually between 5 and 7 years), you won't pay a fee when you sell your units or shares.
Some fund companies may also let you take some of your money (usually 10%) out of the fund each year without charging you a fee.
Your adviser receives commission (usually about 5%) up front from the mutual fund company when you buy the fund. Any deferred sales charge you pay goes to the mutual fund company.
Low load or low sales charge (LSC) – Low load funds charge a lower sales charge (up to 3%) when you buy your units or shares, and a lower redemption fee (up to 3%) when you sell them. You usually won't have to pay a redemption fee if you hold your units or shares for at least 3 years.
No load – A no load fund doesn't charge a fee when you buy or sell its units or shares. A no load fund may not always be a better deal than a load fund. You should compare the MER and performance of each fund before you decide. Typically this is sold within banking branches where the representative is paid a salary by the bank.
Fee-for-services – this is more of a business model than a fund structure. It works similar to No load funds, but the entire portion of the MER generally paid to the dealer/adviser is removed.
Under this structure the advisor and client negotiate a fee for the management and services the advisor provides and the client is billed either through their investment account or by invoice from the advisor. Most advisors that design their business to manage investments in this format will have a fee schedule in place that clearly defines the fees they charge.
The reported rates of return on all mutual funds are the NET returns AFTER the MER has been taken from the fund.  The only exception to this is F class funds, where the advisor compensation should be subtracted from the fund performance to reflect the true rate of return. 

12. Top 3 Costs - MER Management Expense Ratio (MER)
Measure of what it costs to operate a mutual fund (expressed as a % of the fund’s value)
Average 2.5% but varies depending on type of fund
The higher the MER, the more the fund will have to earn in order for you to make money
The fund's management fee and operating expenses make up a fund’s management expense ratio or MER. They are paid by the fund, and are expressed as an annual percentage of the total value of the fund. Before you buy a fund, check its MER and performance, and compare them to similar funds. The MER is charged whether or not the fund does well.
MERs can range from less than 1% to more than 3%.
While you don’t pay these expenses directly, they affect you because they reduce the fund’s returns.
This can add up over time.
The management fee paid to the fund management company includes:
overseeing the fund
hiring a portfolio manager to make the investment decisions, and
hiring other companies to assist in the administration of the fund.
Operating expenses include:
bookkeeping and administrative fees
marketing costs
filings with the provincial securities commissions
legal fees
audit fees
GST/HST.

13. Top 3 Costs – Trailing Commissions
Paid each year to the company that sold you the fund
Reflected in the MER
Ranges from 0.25% - 1.5% of the value of your investment each year
Most mutual funds pay a trailing commission (or trailer fee) each year to the company that sold you the fund.
They pay this commission for as long as you hold the fund.
Here's how it works:
It’s paid out of the fund’s management fee, so it’s reflected in the fund’s MER.
It typically ranges from 0.25% to 1.5% of the value of your investment each year.
It is to pay for the services and advice the company and the adviser provide to you.
The company may pay all or part of the commission to your financial adviser.

14. Your Responsibilities
Be prepared
Ask questions and take notes
Be informed
Stay up to date
Keep your adviser up to date
Be prepared for each meeting. Treat each meeting with your adviser like a business meeting. Take some time before the meeting to review your investments and jot down what you want to discuss. Bring all relevant information, such as recent account statements and tax assessment forms.
Ask questions and take notes. Make sure you understand the investments your adviser recommends and how they fit with your plan. If you don’t understand something, ask for clarification. Take notes of conversations you have with your adviser and what you agree to.
Be informed. Read documents that you receive about investments you’re considering. Learn as much as you can about the investment world through courses, books, newspapers, websites and other media.
Stay on top of your investments. Review your transaction confirmations and account statements as soon as you get them. Make sure they reflect what you discussed and contact your adviser right away if there are any problems.
Keep your adviser up to date. Tell your adviser when your personal or financial circumstances change. Major life changes such as marriage, the birth of a child, divorce or the death of your spouse can have a significant impact on your financial well-being.

15. What if I have a problem? Step 1: Do I have a complaint?
Not registered
Conducts transactions without your permission
Switches you from one mutual fund to another without legitimate reason
Recommends unsuitable products based on the information you provided
Although most financial advisers and the firms they work for are fair, efficient and follow the rules, you may have a complaint if your financial adviser:
is not registered to sell the investments being recommended,
takes money out of your account, or buys or sells securities with your money, without first getting your permission (This does not apply if you have set up a discretionary account, which allows your financial adviser to make trades at their discretion without getting your permission.),
switches you from one mutual fund to another when there is no legitimate reason, 
does not take reasonable care to see that your investment request is executed at the best possible price, given the market conditions at the time, or
recommends you buy or sell a security that is unsuitable based on the information gathered from you in the Know Your Client form (KYC)

16. What if I have a problem? Step 2: Contact the adviser.
Clearly define the issue and outcome you expect
Gather all relevant documents
Keep notes
Step 3: Contact the firm.
Follow their complaint process

17. Learn more! www.investinknowingmore.ca Facebook.com/4NBInvestors
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