13-05-2025
Investor complaints often follow market turbulence. Here's how to protect your practice
Periods of market turbulence are often followed by a rise in client complaints. For advisors to protect their businesses, they should reach out to clients, confirm investment suitability and document client conversations scrupulously.
'When markets are up and people are making money in their portfolios, they tend to be pretty happy. They tend not to be asking too many questions,' says Sarah Bradley, ombudsman and chief executive officer of the Ombudsman for Banking Services and Investments (OBSI).
'But when they're under financial pressure or losing money, that's when they're going to be paying more attention to their investments.'
Complaints usually come after a lag as investors second-guess investment decisions. The top two reasons investors complained last year, according to OBSI's annual report, were investment suitability and service issues (110 complaints in each category), with the latter encompassing a wide range of problems, from instructions not followed to delays in returning calls.
'Complaints tend to flow from a loss of trust,' Ms. Bradley says. 'If consumers are experiencing something negative and unexpected – something they didn't anticipate, that they hadn't prepared for or that they think they didn't agree to – that leads to a sense of unfair treatment. And that leads to a loss of trust and can lead to complaints.'
She sees risk in the current environment, when there's so much public discussion about market movements and what may come next. That can provoke strong emotions, including fear.
But she also sees this as a good opportunity for advisors to double down on the know-your-client (KYC) process, including checking in to ensure it's up to date.
Advisors should view their firm's compliance requirements as a baseline minimum to build upon, she advises. And they should keep very good records, including KYC and know your product (KYP) documentation and meeting notes.
Ensuring clients' investments are aligned with their objectives despite market movements, being forthright about investment risks, and setting clear expectations around communication can minimize negative surprises and complaints, Ms. Bradley says.
When something unexpected does happen, she adds, it's important to reach out proactively, correct errors promptly, and be transparent, open and honest.
Gillian Dingle, partner with Torys LLP in Toronto and co-head of the firm's securities defence practice, says investor complaints are more likely when there's a sector-specific decline in the markets rather than broad-based volatility.
'When everybody is down, it's difficult for investors to view that as something that is the fault of their advisor,' she says. 'Whereas if the market generally is stable but one particular area is down, it's easier for an investor to become concerned that that's because my advisor made an unsuitable investment decision for me.'
Investment suitability is the most common cause of complaints that cross her desk, with investors claiming they're more conservative than their advisor thought. That reinforces the point advisors need to dedicate time and effort to understanding clients through KYC and other processes, and rebalance appropriately when market performance leads to portfolios overconcentrated in one sector or another.
Ms. Dingle recommends ensuring client discussion summaries are time-stamped – for example, advisors sending an e-mail to themselves or, even better, to their client. That can help prove the notes weren't reverse-engineered after a complaint was filed.
'Clear notes are hugely helpful in suitability complaints for establishing – yes, they understood my recommendation, my recommendation was well-founded, and they agreed,' Ms. Dingle says.
The Canadian Investment Regulatory Organization (CIRO) hasn't yet seen a spike in investor complaints related to recent volatility. But, like Ms. Bradley, Alexandra Williams, CIRO's senior vice-president of member regulation and corporate strategy, says there's often a lag.
People will reach out directly to their advisor first to discuss their concerns – although she says it's even better when advisors initiate those conversations.
'It's important to gauge how folks are doing,' she says. 'Some clients can withstand it, [but] some clients might feel much more afraid or concerned, and then advisors can dig into that and have good conversations.'
The top category of complaints in CIRO's latest enforcement report was unsuitable investments (22 per cent), which again supports the idea that advisors need to check and double-check that their clients are invested appropriately. Of course, that's critical at all times, which is why Ms. Williams says it's essential always to maintain sound, scalable communication and due diligence practices.
While it's probably safe to say that almost no one – advisor nor client – likes to see high levels of volatility and uncertainty in the markets, Ms. Williams sees this as a chance to stay close to clients, listen to their worries and update KYC information and adjust portfolios accordingly, if necessary.
Advisors should keep in mind they don't have to have all the answers when they do these check-ins with clients, she says. It's about having the conversation, making the connection and reinforcing the relationship.
'It's stressful, but that's where advisors step into the relationship and show that real value of their expertise and experience,' she says.
