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Wealth Management Case Study

Market Losses Dash Client’s High Hopes

You are on: The Problem

From the Perspective of the Client

A client opened registered and non-registered investment accounts with RBC® which suffered significant capital losses during a downturn in the markets. He had said he was an inexperienced investor with a low risk tolerance. He felt he had received poor quality advice from his investment advisor, and believed his assets were placed in high-risk securities. He wanted RBC to discipline the advisor and compensate his losses. When RBC would not do that, he turned to the Ombudsman for help.

From the Perspective of RBC

The documentation of the account from RBC indicated that the client was a growth-oriented investor, and had a long-term horizon and moderate risk tolerance. They believed the assets recommended by the advisor were in line with the client’s goals.

They also pointed out that the investment industry is not in the habit of compensating clients for capital losses due to market fluctuations.

You are on: The Resolution

The Office of the Ombudsman Reports:

“We confirmed with the client that when the accounts were opened, he did receive a Portfolio Proposal from the advisor which was based on his investment objectives.

We also determined that the investments were professionally researched and offered in good faith. It seems the client’s risk tolerance and expectations changed when the market declined. Since he had originally agreed to the portfolio recommended and hadn’t informed RBC of any changes, we felt we could not support his request for compensation. In this case, our client continued to believe the advice provided was not appropriate, and the case had to be closed with no agreement.”

You are on: What Can be Learned

For RBC:

Avoid any gaps in expectation by exploring your clients' needs and goals. Work with investors to help them anticipate volatile markets over the long-term.

For Clients:

Consider the time frame of your investments, and risk-reward trade-offs. Tell your advisor if your risk tolerance or investment goals change in order to make sure your strategies are still a good fit for you.