Sarah Twomey | Desjardins Group
Over the years, we've heard reports from across country about unfortunate fraud victims who were robbed of their life savings. For example, there's the story of four Albertans who were arrested and accused of defrauding 1,000 investors of $60 million. Another tells the tale of a Montreal-based advisor who is now serving an 11-year sentence for bilking investors out of $50 million. And then there's the one about a Toronto-based advisor who was tried for fraud in excess of $39 million. Luckily, there are ways in which you can protect yourself.
First, do your research: How well do you know your potential advisor?
Protecting yourself from a potential fraudster starts with being informed and selecting a reputable advisor. Start by checking the credentials of the person you are dealing with and the company they represent. Every insurer must be licensed by a provincial oversight agency (for example, the Financial Services Commission in Ontario, the Superintendent of Insurance in Newfoundland and Labrador, etc.). The same applies to every representative who wants to sell you insurance. To check the credentials of an insurer, representative, financial services firm or financial planner, refer to the appropriate provincial regulatory body's website.
Second, don't believe everything you hear
No matter what they call themselves -- financial advisor or otherwise -- be wary of anyone who promises unbelievably high returns or asks you to write a cheque out to his name instead to a recognized firm or company. And be extremely cautious if:
- You are ever asked to keep things secret, or;
- If a representative avoids stating who they work for, or;
- If they claim that all their clients have purchased the investment they're trying to sell you.
Third, understand what you're buying
If you're looking to purchase life insurance, it's important to first decide what you need. Once you've decided, do you know what's available and which product would suit your needs? Generally, there are three types of life insurance:
- Term life insurance, which provides coverage for a set period of time;
- Permanent life insurance, which provides lifetime coverage;
- Universal life insurance, which provides lifetime coverage and tax-free savings opportunities
Fourth, make a list of questions to ask your advisor, like:
- Will the premiums go up?
- Are the returns guaranteed?
- Are there tax implications for withdrawing from my investments?
Also, to ensure that you've covered all the bases, visit the Consumer Information section of your province's financial regulatory organization. It will have information about insurance, guaranteed investment funds and annuities. Additional information can also be found on the Canadian Life and Health Insurance Association website.