‘Part of an advisor’s responsibility is to ensure that the investments traded in the client’s accounts are suitable, not just [to] go along and execute the trade,’ says Sandra Foster of Headspring Consulting.Good financial advisors work hard to provide clients with the best, most prudent investment advice. Sometimes, though, clients are intent on making investment decisions that likely will turn out bad.
“[A Monte Carlo analysis] takes random samplings of the possible range of returns from an investment and lets you look at the probability that you can reach the goals you’ve set,” Mr. Szeto explains. Sometimes, a client’s investment idea may involve investing in a foreign country, says Elena Hanson, a cross-border tax specialist at Oakville, Ont.-based Hanson Crossborder Tax Inc. However, clients need to be reminded that “what works well in one country might be a bad idea in another country – or it might even be illegal.”Thus, knowing when to say no to clients is also important, says Sandra Foster, president of Headspring Consulting Inc. in Toronto.
“If a client suddenly wants to dramatically shift the asset allocation significantly, more than tactically, [which is between five and 10 per cent] based on market fear or market greed, that’s reactionary, not strategic,” Ms. Del Greco says.