Welcome to the RBC Financial Group: Office of the Ombudsman

Investment Risk Higher than Expected

The Problem

Case study:

What can be learned: the expert's advice

From the Client's Perspective

At the urging of a close relative, a RBC client met with an investment advisor (IA) from RBC Dominion Securities (RBC DS). The client was extremely averse to risk. All his investments up to this point were what he considered "risk free," such as GICs. The client said he would like higher income, but was unwilling to assume greater risk. He believed the IA promised to make no-risk investments. When his first account statement reflected lower values, he felt he had been deceived.

From RBC DS' Perspective

The client wanted better returns. The IA explained that higher rewards involved higher risks, and after listening to the client, profiled him as wanting to be "investment grade," at the lowest end of the risk spectrum. The IA suggested a specific investment. The client authorized it and was immediately sent a prospectus outlining the risks. RBC DS points out that according to accepted regulations, an IA can only make recommendations; clients are responsible for investment decisions.

The Resolution

The Office of the Ombudsman reports, "After meeting with both parties, and doing our fact-finding, it became clear that each had some responsibility here.

"Following discussions with his IA, the client made the investment decision and gave the IA the go-ahead. And he didn't dispute the investment when he received the prospectus and trade confirmations.

"But, while the low-risk investment respected the client's wishes for more income, it was not 'investment grade.' Given his clear aversion to risk, that particular vehicle should not have been recommended to him.

"Our office helped both parties get a better understanding of their own responsibilities, and of each other. They accepted our recommendation to work together on a settlement."

What can be learned: the expert's advice

Conflicts are most satisfactorily resolved when they are handled quickly and at the source. In circumstances comparable to this case, what might the parties do to prevent the problem from escalating?

For RBC Financial Group:
Listen carefully to your clients. Reconfirm with clients how you have interpreted their appetite for risk and whether you can deliver on their expectations. If you can't offer a client better returns without increasing his risks, tell him.

For the client:
Listen carefully to your IA. Take notes as appropriate. Inform yourself. You're responsible for investment decisions, so carefully read all documents without delay. If you're unhappy with an investment decision, call your IA immediately upon receipt of the trade confirmation.

Please note: The above case study was chosen because of the significance of the learning derived from it. It is not an attempt to duplicate the demographics of the case by issue, outcome, RBC Financial Group or any other factors.

Photograph does not depict actual customer.

Case Studies

Investment Risk Higher than Expected

The Problem

The Resolution